Two-population Evolutionary Game Research Articles

Firms’ corporate social irresponsibility behaviors during interplay with consumers in evolutionary game models

We employ an evolutionary game model to investigate the interaction between firms’ engagement in corporate social irresponsibility (CSI) behaviors (without violating laws) and consumers’ perception of corporate social responsibility (CSR) within a consumer market. The core paradox revolves around the trade-off between firms benefiting from pursuing economic performance without adhering to social responsibility and the maximization of social welfare achieved when firms are socially responsible, and consumers possess strong CSR perception. Through an asymmetric two-population evolutionary game model, we identify two distinct scenarios of evolutionary stable strategies based on different industrial environments. Additionally, the evolution of a healthy market is contingent upon an increase in consumers’ bargaining power, although it is also influenced by the initial states of the two-group system, resulting in path dependence as a significant feature of the system’s evolutionary equilibrium. Furthermore, we observe that the added willingness to pay for CSR, while not impacting the evolutionary outcomes, could increase the likelihood of a healthy market when consumers’ bargaining power is high. These findings underscore the diverse dynamics of firms’ CSI behaviors, which depend on transaction costs, industrial structure, and consumers’ willingness to pay, offering valuable insights from a micro perspective.

Interaction and imitation with heterogeneous agents: A misleading evolutionary equilibrium

• A two-population evolutionary game involving selfish and pro-social agents. • Heterogeneous individuals interact and also imitate one another. • Uncertainty leads a revising agent to misleadingly imitate other population agents. • Inter-population imitation gives rise to a unique asymptotically stable fixed point. • In this misleading equilibrium selfish and pro-social behavior diverge from the NE. In a two-population evolutionary game we analyze the interaction between individuals belonging to two populations with the same strategy set but different payoffs. A game is played among individuals in the two populations. They imitate agents belonging to the same and also the alternative population. When a revising agent is matched with someone in the alternative population who plays differently, his expected payoff and the observed payoff of his partner diverge. Hence, he conjectures the payoff from switching to the other strategy by weighing what he expected and what he observes. The evolutionary dynamics has a unique locally asymptotically stable fixed point, which typically differs from the evolutionary stable equilibrium without inter-population imitation. For a collective action game we analyze to what extent the compliance rate and the social welfare differ from the Nash equilibrium, and how these gaps depend on the confidence that agents assign to what they see.

Interaction and imitation in a world of Quixotes and Sanchos

This paper studies a two-population evolutionary game in a new setting in between a symmetric and an asymmetric evolutionary model. It distinguishes two types of agents: Sanchos, whose payoffs are defined by a prisoner’s dilemma game, and Quixotes, whose payoffs are defined by a snowdrift game. Considering an imitative revision protocol, a revising agent is paired with someone from his own population or the other population. When matched, they observe payoffs, but not identities. Thus, agents in one population interact and imitate agents from their own population and from the other population. In this setting we prove that a unique mixed-strategy asymptotically stable fixed point of the evolutionary dynamics exists. Taking as an example the compliance with social norms, and depending on the parameters, two type of equilibrium are possible, one with full compliance among Quixotes and partial compliance among Sanchos, or another with partial compliance among Quixotes and defection among Sanchos. In the former type, Sanchos comply above their Nash equilibrium (as they imitate compliant Quixotes). In the latter type, Quixotes comply below their Nash equilibrium (as they imitate defecting Sanchos).

Evolutionary Game Dynamics for Financial Risk Decision-Making in Global Supply Chain

This paper focuses on the game evolution process and its influencing factors of financial risk cooperation behavior between suppliers and manufacturers in global supply chain system. Using two-population evolutionary game theory, the performance of supply chain members under financial risk environment is modeled. Further, the proposed financial risk game model is applied to simulation cases of global supply chain. Based on the theory analysis and simulation results, it is shown that the cooperation strategy is the optimal evolutionarily stable strategy (ESS) for all supply chain members, when facing the high financial risk. The financial risk-sharing coefficient can be regarded as an adjuster that affects risk ESS of both suppliers and manufacturers under the low financial risk setting. By reducing the financial risk-sharing ratio of one supply chain player, his intention of adopting cooperation strategy would be enhanced. Finally, it is observed that financial risk sharing approach may lead to the alignment among supply chain members. Therefore, setting up an effective financial risk-sharing mechanism is beneficial to realize sustainable development of global supply chain.

Sustainable supply chains under government intervention with a real-world case study: An evolutionary game theoretic approach

Abstract It is clear that the problem of global warming and greenhouse gas emissions is one of the most important and challenging issues in recent years. Governments have a key role in managing this crisis. They can influence the polluting activities of producers by enacting policies and applying incentives. In addition, government policies can also affect the production and competitive markets of industries. Applying too-strict policies can lead to significant reductions in producers’ profit, and even complete business closure. For the first time, this paper models the contrast between government objectives and producers' targets, using a two-population evolutionary game theory approach under different scenarios. Three different scenarios are considered for government. In the first scenario, the government imposes taxes and subsidies to maximize its profit with an upper bound for total environmental impacts. In the second one the government chooses tariffs that minimize total environmental impacts by considering a lower bound for its profit. Finally in the third scenario, the government makes a trade-off between its profit and environmental objectives by a linear combination in an objective function. Using two-population evolutionary game theory approach, the performance of supply chains members under different government scenarios is modeled. Finally, the proposed sustainable model is applied to the Indian textile industry. The results show that government policy clearly affects producers’ activity, competitive markets and emissions. Imposed tariffs are the most effective government approach to minimizing environmental impacts.

Political Corruption and Public Activism: An Evolutionary Game-Theoretic Analysis

We study a two-population evolutionary game that models the role of public activism as a deterrent to political corruption. In particular, suppose that politicians can choose whether or not to engage in corruption, lowering the public good in exchange for personal gain, and citizens can choose whether or not to engage in public activism for corruption reform, influencing the rate of detection and severity of punishment of corrupt politicians. We study the Nash equilibria of this game and also conduct static and dynamic evolutionary analyses.

An evolutionary stable strategy for retailers selling complementary goods subject to indirect network externalities

A two-population evolutionary game model is constructed for retailers and used to investigate the effect of indirect network externalities (INEs) and product complementarity on the strategic choice of marketing objective of the retailers. The results show that their strategic choice of marketing objective is correlated with market reservation price (MRP) when the strength of the INE is low. When the MRP is low, the retailers tend to adopt a strategy of profit maximization. As MRP increases, low-cost retailers adopt a strategy of revenue maximization instead of profit maximization to maximize revenue at an earlier stage than high-cost retailers. However, when the strength of the INE is high, retailers only choose a strategy of revenue maximization as their marketing objective. The probability that a retailer uses a revenue maximization strategy increases as the strength of the INE grows, and product complementarity increases, when there is an equilibrium between two pure marketing objective strategies. An optimal preference ratio for retailers may exist when the strength of INE is found to be not large enough. Numerical examples reveal that the degree of preference of retailers to maximize profit is shown to be negatively correlated with both INE and product complementarity. On the other hand, their profits are positively correlated with both of these factors.

Environmental protection mechanisms and technological dynamics

The paper proposes a new financial mechanism that could be implemented to protect the environment of a tourist region. For this purpose, we investigate the potential consequences of two financial activities, issued by the local government (G) of a region R, which work like contracts between G and, respectively, visitors of R and firms operating in R. According to these contracts, agents who decide to visit R (firms that decide to adopt an environmental friendly technology) have to buy an option that entitle them to get a partial or total reimbursement if environmental quality in R turns out to be sufficiently low (high), namely, below (above) a given predetermined threshold level.Using a two-population evolutionary game model, we analyze the dynamics emerging from the model and prove that under such fund rising mechanism the virtuous equilibrium (in which all firms adopt the pollution-free technology and all agents choose to visit the region) is always locally attractive. Furthermore, we show that the attraction basin of the poverty trap equilibrium (in which no firm adopts the clean technology and no tourist comes to the region) can be decreased by raising the reimbursement offered by the local government to the visitors. Finally, using numerical simulations, it can be shown that the dynamics of the model may give rise to another attractive stationary state in correspondence of the environmental quality threshold determined by the government, as well as to a limit cycle that oscillates around the threshold.

Financial Tools for the Abatement of Traffic Congestion: A Dynamical Analysis

In this article we propose a simple mechanism aimed at implementing and supporting environmental protection policies in urban areas based on innovative financial instruments issued by a policy maker (PM), which can be buyed by two categories of involved agents, city users (CU) and agencies providing the city services. According to this mechanism, virtuous service providers choosing to offer high quality services can obtain cost abatement. CU, reciprocally, have to pay for entering into the city, but can protect themselves against a city low quality of life by a self-insurance device. The interaction of these two categories of economic agents is modelled by a two-population evolutionary game, where the population of CU strategically interacts with that of service providers. From the analysis of the model it emerges that such a dynamics may lead to a welfare-improving attracting Nash equilibrium at which all CU choose to use environmental-friendly means of transportation and all service providers choose to offer high quality services. However, the basin of attraction of that equilibrium may have a rather complex morphology. In particular more attractors and/or limit cycles can be present. In such a context we indicate sufficient conditions making the virtuous equilibrium a global attractor for all trajectories starting at a mixed-strategy point.

Strategic bidding in continuous double auctions

In this paper, we describe a novel bidding strategy that autonomous trading agents can use to participate in Continuous Double Auctions (CDAs). Our strategy is based on both short and long-term learning that allows such agents to adapt their bidding behaviour to be efficient in a wide variety of environments. For the short-term learning, the agent updates the aggressiveness of its bidding behaviour (more aggressive means it will trade off profit to improve its chance of transacting, less aggressive that it targets more profitable transactions and is willing to trade off its chance of transacting to achieve them) based on market information observed after any bid or ask appears in the market. The long-term learning then determines how this aggressiveness factor influences an agent's choice of which bids or asks to submit in the market, and is based on market information observed after every transaction (successfully matched bid and ask). The principal motivation for the short-term learning is to enable the agent to immediately respond to market fluctuations, while for the long-term learning it is to adapt to broader trends in the way in which the market demand and supply changes over time. We benchmark our strategy against the current state of the art (ZIP and GDX) and show that it outperforms these benchmarks in both static and dynamic environments. This is true both when the population is homogeneous (where the increase in efficiency is up to 5.2%) and heterogeneous (in which case there is a 0.85 probability of our strategy being adopted in a two-population evolutionary game theoretic analysis).

Visitor and Firm Taxes Versus Environmental Options in a Dynamical Context

The main objective of the paper is to analyze the effects on economic agents' behavior deriving from the introduction of financial activities aimed to environmental protection. The environmental protection mechanism we study should permit exchange of financial activities among citizens, firms, and Public Administration. Such a particular “financial market” is regulated by the Public Administration, but mainly fuelled by the interest of two classes of involved agents: firms and dwelling citizens. We assume that the adoption process of financial decisions is described by a two-population evolutionary game and we study the basic features of the resulting dynamics.

Working too Much in a Polluted World: A North-South Evolutionary Model

This paper examines a simple North-South growth model where negative externalities may contribute to reinforce economic growth. Agents' welfare depends on three goods in the model: leisure, a common access renewable natural resource (one in each hemisphere) and a non-storable consumption good. Production and consumption of the latter good deplete the renewable natural resource. To protect against such environmental deterioration, agents may increase their labor supply in order to produce an additional amount of the consumption good to be used as a substitute for the depleted natural resource. The consequent growth in production and consumption may generate a further depletion of the natural resource. This may lead to a self-enforcing growth process in a polluted world where individuals work and produce too much (i.e. more than socially optimal). We examine the choices of the two hemispheres using a two-population evolutionary game with transboundary pollution across hemispheres. Each agent chooses whether to work low or high. If an agent works low, she can consume the good only to satisfy basic needs (subsistence consumption). If the agent works high, she can consume an additional amount of the good as a substitute for the natural resource (substitution consumption). We assume that people who work high in the North can also have access to the Southern natural resource (e.g. they can afford a holiday in some developing country where natural resources are still relatively unpolluted), whereas the opposite is not true. We show that economic growth in the North and/or in the South may lead to stationary states that are Pareto dominated by states of the world with a lower level of production and consumption. Moreover, negative environmental externalities from the North to the South may foster growth in the South, which may have in turn feedback effects on growth in the North. Finally, we discuss possible welfare effects of transferring the environmental impact of Northern production to the South and show that such a policy may decrease welfare in both hemispheres.