The dissertation examines free-riding behavior and externality problems using game theory and mechanism design. Specifically, I study free-riding behavior in the negotiation process of International Environmental Agreements. I analyze how countries' noncompliance in an environmental agreement affects the results of the bargaining stage. This study explains why countries fulfill non-enforceable treaties and why some countries want to specify high commitment levels to other countries if there is no international organization that perfectly enforces the contents of the environmental agreement.The second part of the thesis studies governments' conservation programs. I assume that the production of biodiversity from these programs can generate negative or positive externalities on those nonparticipating landholders. I identify what the government's optimal transfer is when externalities are considered. Finally, the third chapter analyses an alternative definition of kindness. Specifically, we consider that a player (follower) is concerned about those actions that the other player (leader) does not choose. We show that, without relying on interpersonal payoff comparisons (i.e., with strictly individualistic preferences), our model predicts higher cooperation among the players than standard game-theoretic models.
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