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A Cooperative Dynamic Environmental Game of Subgame Consistent Clean Technology Development

Cooperative adoption and development of clean technology play a key role to effectively solving the continual worsening industrial pollution problem. For cooperation over time to be credible, a subgame consistency solution which requires the agreed-upon optimality principle to remain in effect throughout the collaboration duration has to hold. In this paper, we present a cooperative dynamic game of collaborative environmental management with clean technology development. A subgame consistent cooperative scheme is derived. It is the first time that cooperative dynamic environmental games with clean technology development are analyzed. Given that there exist discrete choices of production techniques and switching to clean technology brings about cost savings and improved effectiveness, the group optimal solution cannot be obtained with standard differentiable optimization techniques. To overcome this problem the joint optimal solutions for all the possible patterns of production techniques are computed and the pattern with the highest joint payoff is then selected. The analysis widens the scope of study in collaborative environmental management.