Game Analysis and Simulation of the River Basin Sustainable Development Strategy Integrating Water Emission Trading

Liang Liu, Cong Feng, Hongwei Zhang and Xuehua Zhang
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Liang Liu: College of Management and Economics, Tianjin University, Tianjin 300072, China
Cong Feng: College of Management and Economics, Tianjin University, Tianjin 300072, China
Hongwei Zhang: School of Environmental Science and Engineering, Tianjin University, Tianjin 300072, China
Xuehua Zhang: School of Environmental and Chemical Engineering, Tianjin Polytechnic University, Tianjin 300387, China

Sustainability, 2015, vol. 7, issue 5, 1-21

Abstract: Water emission trading (WET) is promising in sustainable development strategy. However, low participation impedes its development. We develop an evolutionary game model of two enterprise populations’ dynamics and stability in the decision-making behavior process. Due to the different perceived value of certain permits, enterprises choose H strategy (bidding for permit) or D strategy (not bidding). External factors are simplified according to three categories: r H -bidding related cost, G -price and F -penalty. Participation increase equals reaching point ( H,H ) in the model and is treated as an evolutionarily stable strategy (ESS). We build a system dynamics model on AnyLogic 7.1.1 to simulate the aforementioned game and draw four conclusions: (1) to reach ESS more quickly, we need to minimize the bidding related cost r H and price G , but regulate the heavy penalty F ; (2) an ESS can be significantly transformed, such as from ( D,D ) to ( H,H ) by regulating r H , G and F accordingly; (3) the initial choice of strategy is essential to the final result; (4) if participation seems stable but unsatisfying, it is important to check whether it is a saddle point and adjust external factors accordingly. The findings benefit both water management practice and further research.

Keywords: water allocation; river basin management; sustainable development strategy; emission trading; evolutionary game model; system dynamics simulation (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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