Environmental policy regulation and corporate compliance in evolutionary game models with well-mixed and structured populations
Authored by Silva Rocha Andre Barreira da, Gabriel Meyer Salomao
Date Published: 2019
DOI: 10.1016/j.ejor.2019.05.040
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Abstract
We use an evolutionary game model to study the interplay between
corporate environmental compliance and enforcement promoted by the
policy maker in a country facing a pollution trap, i.e., a scenario in
which the vast majority of firms do not internalize their pollution
negative externality and auditors do not inspect firms. The game
conflict is due to the trade-off in which firms are better-off when they
pollute and are not inspected, while social welfare is maximized when
auditors do not need to inspect socially responsible corporations that
account for pollution in their production decisions regarding technology
used and emission level. Starting with a well-mixed two-population game
model, there is no long run equilibrium and the shares of polluters and
shirking auditors keep oscillating over time. In contrast, when firms
and auditors are allocated in a spatial network, the game displays a
rich dynamics depending on the inspecting cost. While the oscillatory
behaviour is still possible, there is a set of parameters for which a
long run robust equilibrium is achieved with the country leaving the
pollution trap. On the other hand, an excessively high inspection cost
leads to an ineffective auditing process that drives the few compliant
firms out of the country. (C) 2019 Elsevier B.V. All rights reserved.
Tags
Agent-based model
game theory
Cellular automata
Dynamics
pollution
Structured complex
systems
Or in environment and climate change