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Games 2017, 8(3), 30; doi:10.3390/g8030030

Game Theory of Pollution: National Policies and Their International Effects

1
Department of Data Science and Knowledge Engineering, Maastricht University, P.O. Box 616, 6200 MD Maastricht, The Netherlands
2
Delft Institute of Applied Mathematics, Delft University of Technology, Mekelweg 4, 2628 CD Delft, The Netherlands
*
Author to whom correspondence should be addressed.
Received: 17 May 2017 / Revised: 27 June 2017 / Accepted: 11 July 2017 / Published: 18 July 2017
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Abstract

In this paper we put forward a simple game-theoretical model of pollution control, where each country is in control of its own pollution, while the environmental effects of policies do not stop at country borders. In our noncooperative differential game, countries as players minimize the present value of their own costs defined as a linear combination of pollution costs and costs of environmentally friendly policies, where the state vector of the system consists of the pollution stock per country. A player’s time-varying decision is her investment into clean policies, while her expected costs include also pollution caused by her neighbors. We analyze three variants of this game: (1) a Nash game in which each player chooses her investment into clean policies such that her expected costs are minimal, (2) a game in which the players imitate the investments into clean policies of their neighbors without taking the neighbor’s success concerning their costs into account and (3) a game in which each player imitates her neighbors’ investments into clean policies if this behavior seems to bring a profit. In each of these scenarios, we show under which conditions the countries have incentives to act environmentally friendly. We argue that the different results of these games can be used to understand and design effective environmental policies. View Full-Text
Keywords: pollution; game theory; optimal control; imitation; cooperation; Nash game; Stackelberg game pollution; game theory; optimal control; imitation; cooperation; Nash game; Stackelberg game
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This is an open access article distributed under the Creative Commons Attribution License which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited. (CC BY 4.0).

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MDPI and ACS Style

Schüller, K.; Staňková, K.; Thuijsman, F. Game Theory of Pollution: National Policies and Their International Effects. Games 2017, 8, 30.

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