Policy instruments for evolution of bounded rationality: Application to climate-energy problems |
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Authors: | Volker Nannen [Author Vitae] JCJM van den Bergh [Author Vitae] |
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Institution: | a Department of Computer Science, Vrije Universiteit, De Boelelaan 1081a, 1081 HV Amsterdam, The Netherlands b ICREA, Barcelona, Spain c Department of Economics and Economic History & Institute of Environmental Science and Technology, Universitat Autònoma de Barcelona, Edifici Cn, 08193 Bellaterra, Spain |
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Abstract: | We demonstrate how an evolutionary agent-based model can be used to evaluate climate policies that take the heterogeneity of strategies of individual agents into account. An essential feature of the model is that the fitness of an economic strategy is determined by the relative welfare of the associated agent as compared to its immediate neighbors in a social network. This enables the study of policies that affect relative positions of individuals. We formulate two innovative climate policies, namely a prize, altering directly relative welfare, and advertisement, which influences the social network of interactions. The policies are illustrated using a simple model of global warming where a resource with a negative environmental impact—fossil energy—can be replaced by an environmentally neutral yet less cost-effective alternative, namely renewable energy. It is shown that the general approach enlarges the scope of economic policy analysis. |
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Keywords: | B52 C73 H23 Q54 |
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