 Green Investment and Coordination Failure: An Investors' PerspectiveJahel Mielke and Gesine A. Steudle Ecological Economics, 2018, vol. 150, issue C, 88-95 Abstract: To achieve the goal of keeping global warming well below 2 °C, private investors have to shift capital from brown to green infrastructures and technologies and provide additional green investment. In this paper, we present a game-theoretic perspective on the challenge of triggering such investments. The question of climate change mitigation is often related to the prisoner's dilemma, a game with one Nash equilibrium. However, the authors perceive investment for mitigation and adaptation as a coordination problem of selecting among multiple equilibria. To illustrate this, we model a non-cooperative coordination game, related to the stag hunt, with a brown equilibrium with lower payoffs that can be achieved single-handedly and a green equilibrium with higher payoffs that requires coordination. As multiple experiments show, in such games actors often fail to coordinate on a payoff dominant equilibrium due to uncertainty. Thus, we discuss how uncertainty could be reduced along two options: one that concerns a change in the payoff structure of the game and another that concerns subjective probabilities. Keywords: Stag hunt; Coordination failure; Green investment; Strategic uncertainty; Risk dominance (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolec:v:150:y:2018:i:c:p:88-95 DOI: 10.1016/j.ecolecon.2018.03.018 Access Statistics for this article Ecological Economics is currently edited by C. J. Cleveland More articles in Ecological Economics from Elsevier |
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