Myopic vs. foresighted behaviors in a transboundary pollution game with abatement policy and emission permits trading

Abstract

In this paper, we extend the model proposed in Benchekroun, H. and Martin-Herran, G. (2016). The impact of foresight in a transboundary pollution game. European Journal of Operational Research, 251(1), 300–309, to a more general one, in which emission permits trading and abatement policy are taken into consideration, to examine the effect of foresight on the optimal emission levels and optimal abatements in a transboundary industrial pollution game. In our model, a foresighted country chooses strategies to maximize the long-term payoff, while a myopic player ignores the impact of his decisions on the future evolutions of payoff and pollution stock. Considering the emission permits price and abatement costs, we obtain the abatement levels, the emission levels, the value functions, and the trajectories of pollution stocks of the farsighted and myopic countries, respectively. Consisting with the previous, our results show that the revenues obtained from farsighted behavior are larger than those from myopia, and the total emission of myopic countries is more than that of the farsighted ones. The total emissions will decrease with the increasing of abatement cost coefficients and emission permits price. New results are from two aspects. On the one hand, for a myopic country, the larger the abatement cost coefficients are, the smaller the willingness to acquire foresight is. On the other hand, when a myopic country acquires foresight, the other myopic countries still do not implement the abatement, while the farsighted countries should improve their abatement levels.