Evolutionary Game Analysis of Green Technology Innovation Behaviour for Enterprises from the Perspective of Prospect Theory

Abstract

Boosting green technology innovation of enterprise is the key to achieving a win-win situation for both environmental performance and economic performance. However, some Chinese enterprises still have hesitations and misgivings as to whether they should adopt green technology. Considering the uncertainty of the innovation and the irrational psychological factors of decision makers, the purpose of this paper is to analyse the driving mechanisms and the long-term behaviour of enterprises green technology innovation, as well as to explore what preconditions are required for enterprises to adopt green technology innovation. The methods are prospect theory and evolutionary games. This paper first calculates the equilibrium stability and evolutionary stability strategies of the enterprise green technology innovation system and then simulates the effect of subjective gains and losses values and other psychological parameters in the prospect editing and evaluation stage. Results show that increase in subjective gain and decrease in reference points and subjective spill benefit will motivate enterprises to adopt green technology innovation in the prospect editing stage; higher risk preference and lower loss aversion will increase enterprises’ motivation for green technology innovation in the prospect evaluation stage. Besides, we find that enterprise decisions are influenced by risk perception and loss aversion rather than just the magnitude of the benefits and cost. Small- and medium-sized enterprises are more likely to turn to green technology innovation than large enterprises under the same level of risk preference and loss aversion. Finally, some suggestions are put forward for the government to encourage enterprises to adopt green technology innovation. This paper can provide a reference for theoretical and practical research on evolutionary game and prospect theory on green technology innovation of enterprises.