- search hit 1 of 1
Green investment and coordination failure
- To achieve the goal of keeping global warming well below 2 °C, private investors have to shift capital from brown to green infrastructures and technologies and provide additional green investment. In this paper, we present a game-theoretic perspective on the challenge of triggering such investments. The question of climate change mitigation is often related to the prisoner's dilemma, a game with one Nash equilibrium. However, the authors perceive investment for mitigation and adaptation as a coordination problem of selecting among multiple equilibria. To illustrate this, we model a non-cooperative coordination game, related to the stag hunt, with a brown equilibrium with lower payoffs that can be achieved single-handedly and a green equilibrium with higher payoffs that requires coordination. As multiple experiments show, in such games actors often fail to coordinate on a payoff dominant equilibrium due to uncertainty. Thus, we discuss how uncertainty could be reduced along two options: one that concerns a change in the payoffTo achieve the goal of keeping global warming well below 2 °C, private investors have to shift capital from brown to green infrastructures and technologies and provide additional green investment. In this paper, we present a game-theoretic perspective on the challenge of triggering such investments. The question of climate change mitigation is often related to the prisoner's dilemma, a game with one Nash equilibrium. However, the authors perceive investment for mitigation and adaptation as a coordination problem of selecting among multiple equilibria. To illustrate this, we model a non-cooperative coordination game, related to the stag hunt, with a brown equilibrium with lower payoffs that can be achieved single-handedly and a green equilibrium with higher payoffs that requires coordination. As multiple experiments show, in such games actors often fail to coordinate on a payoff dominant equilibrium due to uncertainty. Thus, we discuss how uncertainty could be reduced along two options: one that concerns a change in the payoff structure of the game and another that concerns subjective probabilities.…
Author details: | Jahel MielkeORCiDGND, Gesine A. Steudle |
---|---|
DOI: | https://doi.org/10.1016/j.ecolecon.2018.03.018 |
ISSN: | 0921-8009 |
ISSN: | 1873-6106 |
Title of parent work (English): | Ecological economics |
Subtitle (English): | an Investors' Perspective |
Publisher: | Elsevier |
Place of publishing: | Amsterdam |
Publication type: | Article |
Language: | English |
Year of first publication: | 2018 |
Publication year: | 2018 |
Release date: | 2021/10/22 |
Tag: | Coordination failure; Green investment; Risk dominance; Stag hunt; Strategic uncertainty |
Volume: | 150 |
Number of pages: | 15 |
First page: | 88 |
Last Page: | 95 |
Funding institution: | EU Horizon 2020 programme, DOLFINS project [640772] |
Organizational units: | Mathematisch-Naturwissenschaftliche Fakultät / Institut für Geowissenschaften |
DDC classification: | 5 Naturwissenschaften und Mathematik / 55 Geowissenschaften, Geologie / 550 Geowissenschaften |
Peer review: | Referiert |
Publishing method: | Open Access / Hybrid Open-Access |
License (German): | CC-BY-NC-ND - Namensnennung, nicht kommerziell, keine Bearbeitungen 4.0 International |