Abstract
We analyze a two-stage coalition formation game in which the provision of the global public good is not only associated with variable costs but also fixed costs. We consider that signatories do not share and do share fixed costs. We show that fixed costs may imply corner solutions for equilibrium public good provision levels and generate six different coalition formation scenarios. Some scenarios are a game changer in that stable agreements and global welfare gains from cooperation are large. That is, the well-known conclusion about the “paradox of cooperation” may break down in the light of fixed costs.