Year: 2018
Type: article
Abstract: 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 payoff structure of the game and another that concerns subjective probabilities.
Source: Ecological Economics
Authors: Jahel Mielke, Gesine A. Steudle
Institutions: University of Potsdam, Global Climate Forum
Language: English
Subfield: Economics and Econometrics
Domain: Social Sciences
SDG: Climate action
Open Access status: hybrid
Estimated APC paid: $3,730
Funder: Horizon 2020 Framework Programme
Award: G6722583215
OpenAlex ID: W2802046069