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Environmental Options and Technological Innovation: An Evolutionary Game Model

Author

Listed:
  • Simone Borghesi

    (University of Siena)

  • Angelo Antoci

    (University of Sassari)

  • Marcello Galeotti

    (University of Florence)

Abstract

This paper analyses the effects on economic agents' behaviour of an innovative environmental protection mechanism that the Public Administration of a tourist region may adopt to attract visitors while protecting the environment. On the one hand, the Public Administration sells to the tourists an environmental call option that gives them the possibility of being (partially or totally) reimbursed if the environmental quality in the region turns out to be below a given threshold level. On the other hand, it offers the firms that adopt an innovative, non-polluting technology an environmental put option that allows them to get a reimbursement for the additional costs imposed by the new technology if the environmental quality is above the threshold level. The aim of the paper is to study the dynamics that arise with this financial mechanism from the interaction between the economic agents and the Public Administration in an evolutionary game context.

Suggested Citation

  • Simone Borghesi & Angelo Antoci & Marcello Galeotti, 2009. "Environmental Options and Technological Innovation: An Evolutionary Game Model," Working Papers 2009.90, Fondazione Eni Enrico Mattei.
  • Handle: RePEc:fem:femwpa:2009.90
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    References listed on IDEAS

    as
    1. Jorgen W. Weibull, 1997. "Evolutionary Game Theory," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262731215, January.
    2. Perrings, Charles, 1989. "Environmental bonds and environmental research in innovative activities," Ecological Economics, Elsevier, vol. 1(1), pages 95-110, February.
    3. Perrings,Charles, 1987. "Economy and Environment," Cambridge Books, Cambridge University Press, number 9780521340816, May.
    4. Costanza, Robert & Perrings, Charles, 1990. "A flexible assurance bonding system for improved environmental management," Ecological Economics, Elsevier, vol. 2(1), pages 57-75, April.
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    Citations

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    Cited by:

    1. Angelo Antoci & Marcello Galeotti & Davide Radi, 2011. "Financial Tools for the Abatement of Traffic Congestion: A Dynamical Analysis," Computational Economics, Springer;Society for Computational Economics, vol. 38(3), pages 389-405, October.
    2. Wood, Aaron D. & Mason, Charles F. & Finnoff, David, 2016. "OPEC, the Seven Sisters, and oil market dominance: An evolutionary game theory and agent-based modeling approach," Journal of Economic Behavior & Organization, Elsevier, vol. 132(PB), pages 66-78.
    3. Esther Blanco & Javier Lozano, 2015. "Ecolabels, uncertified abatement, and the sustainability of natural resources: an evolutionary approach," Journal of Evolutionary Economics, Springer, vol. 25(3), pages 623-647, July.

    More about this item

    Keywords

    Environmental Bonds; Call and Put Options; Technological Innovation; Evolutionary Dynamics;

    JEL classification:

    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
    • D62 - Microeconomics - - Welfare Economics - - - Externalities
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General
    • Q28 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Government Policy

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