Environmental quality control and environmental games

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In this paper we have considered a specific environmental game emphasizing both control-prevention efforts and the propensity to pollute by a firm which adopts a given pollution abatement technology. A random payoff game was constructed and solved under a risk neutral assumption and quadratic utilities for both the firm and the environmental controller. The game thus defined, provides a wide range of interpretations and potential approaches for selecting a control-inspection policies to prevent environmental risks. There are of course many facets to this problem, which could be considered and have not been considered in sufficient depth. For example, more complex control mechanisms and liabilities, the effects of insurance and risk sharing, the application of cooperative efforts and subvention of pollution abatement investments (through tax incentives and their like), etc. have not been considered [5,7]. These are topics for further research. The basic presumption of this paper is that it is very difficult to fully enforce pollution prevention by firms, as a result, some controls are needed to ensure that firms be controlled so that appropriate efforts are carried.

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