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The Short-Term and Long-Term Trade-Offs of Sustainable Entrepreneurship

Author

Listed:
  • Hilde Patron
  • William J. Smith

Abstract

We use game theory concepts and tools to model the technology choices of firms that face a trade-off between the short-term profits from “dirty” technologies and the long-term benefits of a clean environment. When the nominal costs from adopting environmentally friendly technologies are “high enough,” then choosing “dirty” technologies is a dominant strategy. However, when firms’ objectives change due to taxes, subsidies, or demand shifts, the optimal strategies of firms can lead to a socially desirable sustainable equilibrium. A simple version of the model is adapted into a classroom activity that allows students to discover the main results of the model via simulations of corporate decision making.

Suggested Citation

  • Hilde Patron & William J. Smith, 2016. "The Short-Term and Long-Term Trade-Offs of Sustainable Entrepreneurship," Journal for Economic Educators, Middle Tennessee State University, Business and Economic Research Center, vol. 16(1), pages 36-48, Fall.
    • Handle: RePEc:mts:jrnlee:v:16:y:2016:i:1:p:36-48
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    References listed on IDEAS

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    1. Philip A. Lawn, 2003. "Environmental Macroeconomics: Extending the IS–LM Model to Include an ‘Environmental Equilibrium’ Curve," Australian Economic Papers, Wiley Blackwell, vol. 42(1), pages 118-134, March.
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    3. Tisha L. N. Emerson & Beck A. Taylor, 2004. "Comparing Student Achievement across Experimental and Lecture-Oriented Sections of a Principles of Microeconomics Course," Southern Economic Journal, John Wiley & Sons, vol. 70(3), pages 672-693, January.
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    6. Charles A. Holt, 2003. "2002 Presidential Address Economic Science: An Experimental Approach for Teaching and Research," Southern Economic Journal, John Wiley & Sons, vol. 69(4), pages 755-771, April.
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    More about this item

    Keywords

    game theory; sustainability; classroom experiment;
    All these keywords.

    JEL classification:

    • A20 - General Economics and Teaching - - Economic Education and Teaching of Economics - - - General
    • C70 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - General
    • Q55 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Technological Innovation

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