Dynamically consistent collaborative environmental management with production technique choices

Abstract

Adoption of environment-preserving production technique plays a key role to effectively solving the continual worsening global industrial pollution problem. Due to the global nature of environmental effects and trade, unilateral response on the part of one nation is often ineffective. Cooperation in environmental management holds out the best promise of effective action. For cooperation over time to be credible, a dynamic consistency condition which requires the agreed-upon optimality principle to remain in effect throughout the collaboration duration has to hold. In this paper, we present a cooperative dynamic game of collaborative environmental management with production technique choices. A dynamically consistent cooperative scheme is derived. It is the first time that dynamically consistent solution is obtained for dynamic games in collaborative environmental management with production technique choices. The analysis widens the scope of study in global environmental management.