18th International Symposium on Dynamic Games and Applications

Grenoble, France, July 9 — 12, 2018

18th International Symposium on Dynamic Games and Applications

Grenoble, France, July 9 — 12, 2018

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Environmental and Resource Economics 1

Jul 10, 2018 09:00 AM – 10:40 AM

Location: room H.102

Chaired by Guiomar Martín-Herrán

4 Presentations

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    09:00 AM - 09:25 AM

    A new rationale for not picking low hanging fruits: the separation of property and control

    • Denis Claude, presenter, Laboratoire d'Économie de Dijon (LEDi), EA 7467, Université de Bourgogne Franche-Comté
    • Mabel Tidball, CEE-M, Univ. Montpellier, CNRS, INRA, SupAgro

    Technological innovations make possible a continuous improvement of the energy efficiency of industrial systems. The optimization of production processes in combination with the acquisition of innovative energy efficiency solutions enables better energy management and performance. These improvements are deemed to be profitable since they strengthen the competitiveness of the firm while enabling the achievement of social and environmental responsibility objectives such as reducing pollutant emissions. From this perspective, firms should seize every opportunity to improve their energy efficiency. In actual practice, however, even investments that involve low up-front expenditures and generate quick returns may fail to materialize. An abundant literature has investigated this apparent paradox. Suggested explanations include artificially low energy prices, underestimated implementation costs, information deficits, uncertainty and irreversibility of investment, market failures and cognitive biases.
    The present paper suggests a new rationale that rests upon the strategic value of credible commitment (Schelling, 1960). Following the strategic delegation literature, we consider a two-stage sequential game in which each firm's owner has the possibility to delegate production and investment decisions to a manager. In this context, profit-maximizing owners may design compensation contracts so as to induce managers to pursue objectives that differ from profit maximization. We show that the equilibrium incentives embedded in compensation contracts may require managers to ignore all or part of energy costs in their production and investment decisions.

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    09:25 AM - 09:50 AM

    Tragedy of the Commons and Social Networks: Economic Incentives versus Strengthening of Social Ties

    • Renan Goetz, presenter, University of Girona
    • Jorge Marco, University of Girona

    We revisit the problem of the tragedy of the commons and analyze the
    role of social networks and social pressure as driving forces for the establishment and
    maintenance of cooperation in resource use under variable social and environmental
    conditions. The social-ecological system is coupled and co-evolve in time. We show the
    extent to which social pressure contributes to overcoming the tragedy of the commons.
    We find large regions where traditional policy instruments (taxes or subsidies) and
    network-orientated polices (the higher the local cohesiveness of compliers the higher
    the social pressure is) can be applied indistinctly, and analyze to what extent such
    regions depend on the network structure, the state of the natural resource, and the
    share of compliers.

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    09:50 AM - 10:15 AM

    Game Theoretical Analysis of a Reputation-Based Cryptocurrency Mining Paradigm

    • Mehrdad Nojoumian, presenter, Florida Atlantic University

    The mining process in the Blockchain is very resource intensive, therefore, miners form coalitions to verify each block of transactions in return for a reward where only the first coalition that accomplishes the proof-of-work will be rewarded. This leads to intense competitions among miners and consequently dishonest mining strategies. As a result, it is necessary to regulate the mining process to make miners accountable for any dishonest mining behavior. We therefore propose a new reputation-based cryptocurrency mining paradigm in which miners not only are incentivized to conduct honest mining but also disincentivized to commit to any malicious activities against other mining pools. In our setting, a mining game is repeatedly played among a set of pool managers and miners where the reputation of each miner or mining ally is continuously measured. At each round of the game, the pool managers send invitations only to a subset of miners based on a non-uniform probability distribution defined by the miners' reputation values. We show that by using our proposed solution concept, honest mining becomes Nash Equilibrium in our setting. In other words, it will not be in the best interest of the miners to employ dishonest mining strategies even by gaining a short-term utility. This is due to the consideration of a long-term utility in our model and its impact on the miners' utilities overtime.

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    10:15 AM - 10:40 AM

    Selection of a Markov perfect Nash equilibrium in a class of differential games

    • Javier de Frutos, presenter, GERAD - Universidad de Valladolid
    • Guiomar Martín-Herrán, GERAD - Universidad de Valladolid

    This note revisits the problem of how to select an equilibrium in a differential game in the case of multiplicity of Nash equilibria. Most of the previous applied dynamic games literature has considered preplay negotiations between players, implicitly or explicitly, with the aim of reaching an agreement on the selection of the pair of strategies. The main objective of this note is to analyze which would be the most likely equilibrium without preplay communications. We study the linear and nonlinear Markov perfect Nash equilibria for a class of well-known models in the literature if preplay communications are eliminated. We analyze both symmetric and nonsymmetric strategies. We show that the nonlinear strategies are not always the optimal strategies implemented when cheap talk is removed. We conclude that in the presence of multiple equilibria and without cheap talk the most likely equilibria are symmetric piecewise linear Markov perfect Nash equilibria at least for a range of initial values of the state variable.

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