The Strategic Impact of Adaptation in a Transboundary Pollution Dynamic Game

The Strategic Impact of Adaptation in a Transboundary Pollution Dynamic Game This work studies the strategic impact of a region’s investment in adaptation measures on the equilibrium outcomes of a transboundary pollution dynamic game played in finite horizon. We incorporate adaptation as a region-specific capital stock that decreases local damages and study the feedback (subgame perfect) equilibrium of the non-cooperative game between two regions. In order to discern the impact of adaptation, we compare the equilibrium solutions of three scenarios, which differ in the regions’ ability to invest in adaptation measures. The results show that investing in adaptation gives regions an incentive to increase their emissions, which causes an inverse strategic response in the other region. The anticipation of a rise in pollution makes the other region respond by cutting its emissions and investing more in adaptation. The equilibrium trajectories of the stocks of pollution and adaptation capital follow the highest path over time when both regions adapt. When there is an asymmetry between regions in their adaptation capabilities, the region that does not (or cannot) adapt becomes worse off due to lower emissions and higher damages, while the adapting region finishes the game better off than the no-adaptation case. Keywords Adaptation · Transboundary pollution · Dynamic game · Non-cooperative http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Environmental Modeling & Assessment Springer Journals

The Strategic Impact of Adaptation in a Transboundary Pollution Dynamic Game

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Publisher
Springer International Publishing
Copyright
Copyright © 2018 by Springer International Publishing AG, part of Springer Nature
Subject
Environment; Math. Appl. in Environmental Science; Mathematical Modeling and Industrial Mathematics; Operations Research/Decision Theory; Applications of Mathematics
ISSN
1420-2026
eISSN
1573-2967
D.O.I.
10.1007/s10666-018-9616-4
Publisher site
See Article on Publisher Site

Abstract

This work studies the strategic impact of a region’s investment in adaptation measures on the equilibrium outcomes of a transboundary pollution dynamic game played in finite horizon. We incorporate adaptation as a region-specific capital stock that decreases local damages and study the feedback (subgame perfect) equilibrium of the non-cooperative game between two regions. In order to discern the impact of adaptation, we compare the equilibrium solutions of three scenarios, which differ in the regions’ ability to invest in adaptation measures. The results show that investing in adaptation gives regions an incentive to increase their emissions, which causes an inverse strategic response in the other region. The anticipation of a rise in pollution makes the other region respond by cutting its emissions and investing more in adaptation. The equilibrium trajectories of the stocks of pollution and adaptation capital follow the highest path over time when both regions adapt. When there is an asymmetry between regions in their adaptation capabilities, the region that does not (or cannot) adapt becomes worse off due to lower emissions and higher damages, while the adapting region finishes the game better off than the no-adaptation case. Keywords Adaptation · Transboundary pollution · Dynamic game · Non-cooperative

Journal

Environmental Modeling & AssessmentSpringer Journals

Published: May 29, 2018

References

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