| Abstract: |
| Industrial pollution and its limitation have become a very important concern. In this paper we consider a polluting industry and a government with the possibility of supervising this pollution. The interaction between the firms within the industry and the government is modelled as an evolutionary game. We show that, by defining an appropriate fine, the government can design a pollution control mechanism with which all firms optimally achieve the same level of pollution reduction---which we call green level, and in turn can be predetermined by the government. This mechanism requires a specific level of government`s supervision for each firm that is proportional to the firm`s cost of pollution reduction. We also provide two specific examples of fine to design the mechanism: piecewise affine and piecewise quadratic. The practical implementation of the former is much easier, but the latter exhibits the property that the rate of convergence to the green level is greater the more polluting the companies are. These properties are very relevant for applications in environmental policy. |
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