Escaping green prison through evolutionary games for firms

Tautvydas Ragulskis, Renatas Kizys, Valdonė Darškuvienė and Dalius Misiūnas

Finance Research Letters, 2025, vol. 80, issue C

Abstract: This article presents a model of iterated dynamics that examines firms’ economic behavior in the context of environmental sustainability initiatives within a competitive game theory framework, which is optionally incentivized by government actions. Beginning with a review of literature on evolutionary game theory and sustainability, the paper explores behavioral dynamics of firms engaged in environmental sustainability efforts, frame within the Prisoner's Dilemma. The analysis highlights the importance of optimal government incentives in promoting environmental sustainability practices. The study derives an evolutionary stable strategy (ESS) for firms engaged in environmental sustainability policies, within a competitive 2 × 2 matrix environment, considering a finite evolutionary horizon.

Keywords: Environmental sustainability; Evolutionary game theory; Government incentives; Prisoner's dilemma; Small and medium-sized enterprises (SMEs) (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:80:y:2025:i:c:s1544612325006002

DOI: 10.1016/j.frl.2025.107337

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