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A Cooperative Stochastic Differential Game of Transboundary Industrial Pollution between Two Asymmetric Nations

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  • Yongxi Yi
  • Rongwei Xu
  • Sheng Zhang

Abstract

Considering the fact that transboundary pollution control calls for the cooperation between interested parties, this paper studies a cooperative stochastic differential game of transboundary industrial pollution between two asymmetric nations in infinite-horizon level. In this paper, we model two ways of transboundary pollution: one is an accumulative global pollutant with an uncertain evolutionary dynamic and the other is a regional nonaccumulative pollutant. In our model, firms and governments are separated entities and they play a Stackelberg game, while the governments of the two nations can cooperate in pollution reduction. We discuss the feedback Nash equilibrium strategies of governments and industrial firms, and it is found that the governments being cooperative in transboundary pollution control will set a higher pollution tax rate and make more pollution abatement effort than when they are noncooperative. Additionally, a payment distribution mechanism that supports the subgame consistent solution is proposed.

Suggested Citation

  • Yongxi Yi & Rongwei Xu & Sheng Zhang, 2017. "A Cooperative Stochastic Differential Game of Transboundary Industrial Pollution between Two Asymmetric Nations," Mathematical Problems in Engineering, Hindawi, vol. 2017, pages 1-10, April.
    • Handle: RePEc:hin:jnlmpe:9492582
    DOI: 10.1155/2017/9492582
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    Cited by:

    1. Li, Liming & Chen, Weidong, 2021. "The impact of subsidies in a transboundary pollution game with myopic players," Omega, Elsevier, vol. 103(C).
    2. Xiao, Lu & Liu, Jianyue & Ge, Jinwen, 2021. "Dynamic game in agriculture and industry cross-sectoral water pollution governance in developing countries," Agricultural Water Management, Elsevier, vol. 243(C).

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