IDEAS home Printed from https://ideas.repec.org/a/eee/finlet/v80y2025ics1544612325006002.html

Escaping green prison through evolutionary games for firms

Author

Listed:
  • Ragulskis, Tautvydas
  • Kizys, Renatas
  • Darškuvienė, Valdonė
  • Misiūnas, Dalius

Abstract

This article presents a model of iterated dynamics that examines firms’ economic behavior in the context of environmental sustainability initiatives within a competitive game theory framework, which is optionally incentivized by government actions. Beginning with a review of literature on evolutionary game theory and sustainability, the paper explores behavioral dynamics of firms engaged in environmental sustainability efforts, frame within the Prisoner's Dilemma. The analysis highlights the importance of optimal government incentives in promoting environmental sustainability practices. The study derives an evolutionary stable strategy (ESS) for firms engaged in environmental sustainability policies, within a competitive 2 × 2 matrix environment, considering a finite evolutionary horizon.

Suggested Citation

  • Ragulskis, Tautvydas & Kizys, Renatas & Darškuvienė, Valdonė & Misiūnas, Dalius, 2025. "Escaping green prison through evolutionary games for firms," Finance Research Letters, Elsevier, vol. 80(C).
    • Handle: RePEc:eee:finlet:v:80:y:2025:i:c:s1544612325006002
    DOI: 10.1016/j.frl.2025.107337
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S1544612325006002
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.frl.2025.107337?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to

    for a different version of it.

    References listed on IDEAS

    as
    1. Kreps, David M. & Milgrom, Paul & Roberts, John & Wilson, Robert, 1982. "Rational cooperation in the finitely repeated prisoners' dilemma," Journal of Economic Theory, Elsevier, vol. 27(2), pages 245-252, August.
    2. Larry Samuelson, 2016. "Game Theory in Economics and Beyond," Journal of Economic Perspectives, American Economic Association, vol. 30(4), pages 107-130, Fall.
    3. Daniel Friedman, 1998. "On economic applications of evolutionary game theory," Journal of Evolutionary Economics, Springer, vol. 8(1), pages 15-43.
    4. Juan Pineiro-Chousa & Marcos Vizcaíno-González & M. Ángeles López-Cabarcos, 2016. "Reputation, Game Theory and Entrepreneurial Sustainability," Sustainability, MDPI, vol. 8(11), pages 1-13, November.
    5. Cailin Slattery & Owen Zidar, 2020. "Evaluating State and Local Business Tax Incentives," Working Papers 261, Princeton University, Department of Economics, Center for Economic Policy Studies..
    6. Matjaž Perc & Zhen Wang, 2010. "Heterogeneous Aspirations Promote Cooperation in the Prisoner's Dilemma Game," PLOS ONE, Public Library of Science, vol. 5(12), pages 1-8, December.
    7. McWhinnie, Stephanie F., 2009. "The tragedy of the commons in international fisheries: An empirical examination," Journal of Environmental Economics and Management, Elsevier, vol. 57(3), pages 321-333, May.
    8. Antoine Dechezleprêtre & Elias Einiö & Ralf Martin & Kieu-Trang Nguyen & John Van Reenen, 2023. "Do Tax Incentives Increase Firm Innovation? An RD Design for R&D, Patents, and Spillovers," American Economic Journal: Economic Policy, American Economic Association, vol. 15(4), pages 486-521, November.
    9. Cailin Slattery & Owen Zidar, 2020. "Evaluating State and Local Business Incentives," Journal of Economic Perspectives, American Economic Association, vol. 34(2), pages 90-118, Spring.
    10. Cason, Timothy N. & Lau, Sau-Him Paul & Mui, Vai-Lam, 2019. "Prior interaction, identity, and cooperation in the Inter-group Prisoner's Dilemma," Journal of Economic Behavior & Organization, Elsevier, vol. 166(C), pages 613-629.
    11. Feng, Nan & Ge, Jiamin, 2024. "How does fiscal policy affect the green low-carbon transition from the perspective of the evolutionary game?," Energy Economics, Elsevier, vol. 134(C).
    12. Zhao, Lin & Chong, Kim Mee & Gooi, Leong-Mow & Yan, Luqing, 2024. "Research on the impact of government fiscal subsidies and tax incentive mechanism on the output of green patents in enterprises," Finance Research Letters, Elsevier, vol. 61(C).
    13. María A. Quintás & Ana I. Martínez-Senra & Antonio Sartal, 2018. "The Role of SMEs’ Green Business Models in the Transition to a Low-Carbon Economy: Differences in Their Design and Degree of Adoption Stemming from Business Size," Sustainability, MDPI, vol. 10(6), pages 1-20, June.
    14. Appelbaum, Elie & Katz, Eliakim, 2022. "Bonding by guilt: A resolution of the finite horizon prisoners’ dilemma," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 100(C).
    15. Alessio Carrozzo Magli & Pompeo Della Posta & Piero Manfredi, 2021. "The Tragedy of the Commons as a Prisoner’s Dilemma. Its Relevance for Sustainability Games," Sustainability, MDPI, vol. 13(15), pages 1-10, July.
    16. Irem Guceri & Li Liu, 2019. "Effectiveness of Fiscal Incentives for R&D: Quasi-experimental Evidence," American Economic Journal: Economic Policy, American Economic Association, vol. 11(1), pages 266-291, February.
    17. Donadelli, Michael & Grüning, Patrick & Jüppner, Marcus & Kizys, Renatas, 2021. "Global temperature, R&D expenditure, and growth," Energy Economics, Elsevier, vol. 104(C).
    18. Ananish Chaudhuri, 2011. "Sustaining cooperation in laboratory public goods experiments: a selective survey of the literature," Experimental Economics, Springer;Economic Science Association, vol. 14(1), pages 47-83, March.
    19. Martin A. Nowak & Akira Sasaki & Christine Taylor & Drew Fudenberg, 2004. "Emergence of cooperation and evolutionary stability in finite populations," Nature, Nature, vol. 428(6983), pages 646-650, April.
    20. Andrew R. Tilman & Joshua B. Plotkin & Erol Akçay, 2020. "Evolutionary games with environmental feedbacks," Nature Communications, Nature, vol. 11(1), pages 1-11, December.
    21. Robert G. Eccles & Ioannis Ioannou & George Serafeim, 2014. "The Impact of Corporate Sustainability on Organizational Processes and Performance," Management Science, INFORMS, vol. 60(11), pages 2835-2857, November.
    22. Fort, H. & Sicardi, E., 2007. "Evolutionary Markovian strategies in 2×2 spatial games," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 375(1), pages 323-335.
    23. Nguyen, Tam & Verreynne, Martie-Louise & Steen, John & Torres de Oliveira, Rui, 2023. "Government support versus international knowledge: Investigating innovations from emerging-market small and medium enterprises," Journal of Business Research, Elsevier, vol. 154(C).
    24. Yu Liu & Dong Cai & Chunxiang Guo & Haizhen Huang, 2020. "Evolutionary Game of Government Subsidy Strategy for Prefabricated Buildings Based on Prospect Theory," Mathematical Problems in Engineering, Hindawi, vol. 2020, pages 1-10, November.
    25. Dean, Thomas J. & McMullen, Jeffery S., 2007. "Toward a theory of sustainable entrepreneurship: Reducing environmental degradation through entrepreneurial action," Journal of Business Venturing, Elsevier, vol. 22(1), pages 50-76, January.
    26. Pacheco, Desirée F. & Dean, Thomas J. & Payne, David S., 2010. "Escaping the green prison: Entrepreneurship and the creation of opportunities for sustainable development," Journal of Business Venturing, Elsevier, vol. 25(5), pages 464-480, September.
    27. Wang, Yunxiao & He, Ziwen & Zou, Jianke & Xie, Henglang & Bao, Junsong, 2024. "Energy transition for sustainable economy: What is the role of government governance and public concern?," Finance Research Letters, Elsevier, vol. 69(PA).
    28. Schoenmaker, Dirk & Schramade, Willem, 2024. "Shareholder primacy or stakeholder governance?," Finance Research Letters, Elsevier, vol. 69(PB).
    29. Fanghella, Valeria & Ploner, Matteo & Tavoni, Massimo, 2021. "Energy saving in a simulated environment: An online experiment of the interplay between nudges and financial incentives," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 93(C).
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Tetsushi Ohdaira, 2021. "Cooperation evolves by the payoff-difference-based probabilistic reward," The European Physical Journal B: Condensed Matter and Complex Systems, Springer;EDP Sciences, vol. 94(11), pages 1-8, November.
    2. Appelbaum, Elie & Katz, Eliakim, 2022. "Bonding by guilt: A resolution of the finite horizon prisoners’ dilemma," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 100(C).
    3. Lester, Rebecca & Olbert, Marcel, 2025. "Firms’ real and reporting responses to taxation: A review," Journal of Accounting and Economics, Elsevier, vol. 80(2).
    4. Kamei, Kenju, 2016. "Information Disclosure and Cooperation in a Finitely-repeated Dilemma: Experimental Evidence," MPRA Paper 75100, University Library of Munich, Germany.
    5. Kenju Kamei & Louis Putterman, 2018. "Reputation Transmission Without Benefit To The Reporter: A Behavioral Underpinning Of Markets In Experimental Focus," Economic Inquiry, Western Economic Association International, vol. 56(1), pages 158-172, January.
    6. Andrew Hanson & Shawn Rohlin, 2024. "Local employment multipliers for large publicly subsidized firms: Evidence from a synthetic control approach," Journal of Regional Science, Wiley Blackwell, vol. 64(2), pages 491-526, March.
    7. Zhao, Zhengwu & Zhang, Chunyan, 2023. "The mechanisms of labor division from the perspective of task urgency and game theory," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 630(C).
    8. Thomaz Teodorovicz & Prithwiraj (Raj) Choudhury & Evan Starr, 2025. "Location-Specificity and Relocation Incentive Programs for Remote Workers," Organization Science, INFORMS, vol. 36(1), pages 186-212, January.
    9. Zhang, Boyu & An, Xinmiao & Dong, Yali, 2021. "Conditional cooperator enhances institutional punishment in public goods game," Applied Mathematics and Computation, Elsevier, vol. 390(C).
    10. Martin G. Kocher & Peter Martinsson & Kristian Ove R. Myrseth & Conny E. Wollbrant, 2017. "Strong, bold, and kind: self-control and cooperation in social dilemmas," Experimental Economics, Springer;Economic Science Association, vol. 20(1), pages 44-69, March.
    11. Émilie Lanciano & Séverine Saleilles, 2017. "Small firms in the sustainable transformation of food industry: entangling entrepreneurship and activism in grassroots innovation processes," Post-Print halshs-01879116, HAL.
    12. Kamei, Kenju, 2020. "Voluntary disclosure of information and cooperation in simultaneous-move economic interactions," Journal of Economic Behavior & Organization, Elsevier, vol. 171(C), pages 234-246.
    13. Raghunandan, Aneesh, 2024. "Government subsidies and corporate misconduct," LSE Research Online Documents on Economics 122855, London School of Economics and Political Science, LSE Library.
    14. Ivanov, Ivan T. & Zimmermann, Tom, 2024. "The “Privatization” of municipal debt," Journal of Public Economics, Elsevier, vol. 237(C).
    15. Yan, Fang & Hou, Xiaorong & Tian, Tingting & Chen, Xiaojie, 2023. "Nonlinear model reference adaptive control approach for governance of the commons in a feedback-evolving game," Chaos, Solitons & Fractals, Elsevier, vol. 174(C).
    16. Brusco, Giacomo & Velayudhan, Tejaswi, 2025. "VAT incidence in real VAT systems," Journal of Public Economics, Elsevier, vol. 249(C).
    17. Siegloch, Sebastian & Wehrhöfer, Nils & Etzel, Tobias, 2021. "Direct, Spillover and Welfare Effects of Regional Firm Subsidies," CEPR Discussion Papers 16129, Centre for Economic Policy Research.
    18. Gürerk, Özgür & Irlenbusch, Bernd & Rockenbach, Bettina, 2014. "On cooperation in open communities," Journal of Public Economics, Elsevier, vol. 120(C), pages 220-230.
    19. Mitchell, Matt & Farren, Michael & Gonzalez, Olivia & Horpedahl, Jeremy, 2019. "The Economics of a Targeted Economic Development Subsidy," Annals of Computational Economics, George Mason University, Mercatus Center, November.
    20. Robinson, Sarah & Tazhitdinova, Alisa, 2025. "One hundred years of U.S. state taxation," Journal of Public Economics, Elsevier, vol. 241(C).

    More about this item

    Keywords

    ;
    ;
    ;
    ;
    ;

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:finlet:v:80:y:2025:i:c:s1544612325006002. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/frl .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.