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

Hilde Patron and William J. Smith

Journal for Economic Educators, 2016, vol. 16, issue 1, 36-48

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.

Keywords: game theory; sustainability; classroom experiment (search for similar items in EconPapers)
JEL-codes: A20 C70 Q55 (search for similar items in EconPapers)
Date: 2016
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Persistent link: https://EconPapers.repec.org/RePEc:mts:jrnlee:v:16:y:2016:i:1:p:36-48

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