An Interaction between Government and Manufacturer in Implementation of Cleaner Production: A Multi-Stage Game Theoretical Analysis

Abstract

This paper shows how game theory can be applied to modeling the interaction between government and manufacturer in implementation of cleaner production. A generic game model based upon ‘Two-person Non-cooperative’ static game is created to allow various strategic actions being tested by stages, and aid decision making by selecting optimal strategy for both manufacturer and policy maker to reduce lifecycle based environmental impact while maximizing the economic benefits. The game theoretical result suggests a ‘win-win’ strategic situation as the best interaction, which indicates that manufacturer implements the clean technology voluntarily and government no longer needs to intervene intensely in manufacturer’s environmental unfriendly behavior. In addition, a case example is given to help a tombarthite manufacturer select the feasibly optional clean technology to improve the existing process of production, which provides a useful insight into the application of game theory. Limitations of the game theoretical analysis are discussed to lay out a foundation for further study.