Study On Competition Game With Boundedly Rational Firms Participating In Carbon Emission Trading

Global warming has been caused the attention of people around the world, and people areexploring measures actively to reduce the greenhouse gas emissions. Carbon emission trading, whichis solving or weakening price distortion in resources allocation by means of market mechanism, couldreduce greenhouse gas emissions efficiently and is widely applied by global society. Whenparticipating in the carbon emission trading scheme, firms’ production, technologies and equipmentsare all effected, so they have to know how to deal with the problem bringed by carbon emissiontrading. The article is doing research on the competition game of bounded rational firms who take partin carbon emission trading. Making use of the Game Theory and Nonlinear Dynamic Systems Theory,this anticle analyse the stability conditions, equilibrium results, evolution tendency of quantitycompetition and price competition of bounded rational players as well as deeply look into the impactof carbon emission trading on the competition process and equilibrium results. In addition, this paperstudy the evolutionary game with carbon abatement behavior of bounded rational firms and putforward some advices for firms on carbon emission trading decision at the meantime. The mainresults of this article are as follows:1. Improving the Cournot model with bounded rationality, and then applying it to the carbonemission trading market, a duopoly game with bounded rationality and carbon emission trading isestablished. By using the theory of nonlinear dynamic systems, the existence and stability of theequilibrium point of this model are discussed and some numerical simulations are made. The researchresults show that the price of allowances of carbon emission trading and the carbon emissioncoefficient not only affect the outputs of each firm in the equilibrium point, but also influence thestability of system. Nash equilibrium of the model can be maintainable by using delayed feedbackcontrol method when the model in chaos state.2. Based on the dynamic Bertrand model, a duopoly game with heterogeneous playersparticipating in carbon emission trading is formulated. The stable conditions of the equilibrium pointsof this system are discussed. Numerical simulations are used to show bifurcation diagrams, strangeattractors, and sensitive dependence on initial conditions and the largest Lyapunov exponents arecomputed. We observe that the speed of adjustment of bounded rational player may change thestability of the Nash equilibrium and cause the system to behave chaotically. In addition, we find thatthe price of allowances of carbon emission trading and the carbon emission coefficient play animportant role in the duopoly game. 3. Aiming at the strategies’ choice of carbon abatement behaviors of bounded rational firmsparticipating in carbon emission trading, an evolutionary game with carbon abatement behavior ofbounded rational firms is formulated on the basis of evolutionary game theory. The evolutionarystable strategy of this system is discussed. The results show that the abatement strategies of two firmsare related to their carbon abatement cost per unit. When the carbon abatement cost per unit of twofirms change, some evolutionary stable equilibrium is found. The more the extra profits a firm gotwhen it carry out the carbon abatement action alone, the more possibility the firm would take action toreduce carbon emission. If the subsidies government provide for the firms who carry out the carbonabatement action are big enough, the firms would have the motive to carry out the carbon abatementaction to reduce carbon emission.