Evolutionary Analysis of Climate Policy and Renewable Energy: Heterogeneous Agents, Relative Welfare and Social Network
AbstractWe demonstrate how an evolutionary agent-based model can be used to evaluate climate policies that take the heterogeneity of strategies of individual agents into account. An essential feature of the model is that the fitness of an economic strategy is determined by the relative welfare of the associated agent as compared to its immediate neighbors in a social network. This enables the study of policies that affect relative positions of individuals. We formulate two innovative climate policies, namely `prizes', altering directly relative welfare, and `advertisement', which influences the social network of interactions. The policies are illustrated using a simple model of global warming where a resource with a negative environmental impact---fossil energy---can be replaced by an environmentally neutral yet less cost effective alternative, namely renewable energy. It is shown that the general approach enlarges the scope of economic policy analysis.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 25881.
Date of creation: 14 Jul 2008
Date of revision:
agent-based modeling; behavioral economics; climate policy; evolutionary economics; relative welfare; social network;
Find related papers by JEL classification:
- B52 - Schools of Economic Thought and Methodology - - Current Heterodox Approaches - - - Institutional; Evolutionary
- H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
- Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters
- C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
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