Environmental policy regulation and corporate compliance in evolutionary game models with well-mixed and structured populations

DOI10.1016/J.EJOR.2019.05.040zbMATH Open1431.91269arXiv1802.09406OpenAlexW2952974940WikidataQ109152122 ScholiaQ109152122MaRDI QIDQ2312342FDOQ2312342

Authors: André Barreira da Silva Rocha, Gabriel Meyer Salomão 

Publication date: 5 July 2019

Published in: European Journal of Operational Research (Search for Journal in Brave)

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 where the few compliant firms are driven out of the country.

Full work available at URL: https://arxiv.org/abs/1802.09406

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zbMATH Keywords

game theorycellular automataagent-based modelOR in environment and climate changestructured complex systems

Mathematics Subject Classification ID

Environmental economics (natural resource models, harvesting, pollution, etc.) (91B76) Evolutionary games (91A22)

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Cited In (13)

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• Repeated prisoner's dilemma games in multi-player structured populations with crosstalk
• Effects of attitudes on the evolution of cooperation on complex networks
• An evolutionary approach to pollution control in competitive markets
• An evolutionary game on compliant and non-compliant firms in groundwater exploitation
• Evolutionary behaviors regarding pricing and payment-convenience strategies with uncertain risk
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• Corruption, evasion and environmental policy: a game theory approach
• The environmental responsibility of firms and insurance coverage in an evolutionary game
• Evolutionary dynamics of compliance in a two-population game of auditors and taxpayers
• Firm response to ethically motivated boycotts
• Large-scale group decision-making with non-cooperative behaviors and heterogeneous preferences: an application in financial inclusion

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