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Network Economics and the Environment: Insights and Perspectives

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Abstract

Local interactions and network structures appear to be a prominent feature of many environmental problems. This paper discusses a wide range of issues and potential areas of application, including the role of relational networks in the pattern of adoption of green technologies, common pool resource problems characterized by a multiplicity of sources, the role of social networks in multi-level environmental governance, infrastructural networks in the access to and use of natural resources such as oil and natural gas, the use of networks to describe the internal structure of inter-country relations in international agreements, and the formation of bilateral “links” in the process of building up an environmental coalition. For each of these areas, we examine why and how network economics would be an effective conceptual and analytical tool, and discuss the main insights that we can foresee.

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Notes

  1. As of September 2013, 197 countries have ratified the Protocol, banning the production of chlorofluorocarbons, halons, and other ozone-depleting chemicals.

  2. Other social games that have been studied in the evolutionary literature are the “stage-hunt” and the “snowdrift” games, where dominant strategies are absent and dynamics select one out of multiple equilibria.

  3. These also include direct reciprocity, indirect reciprocity, kin selection and multi-level selection.

  4. The two main metaphors for the tension between private and collective incentives are the Prisoners’ Dilemma (in which defecting is a dominant strategy) and the Snowdrift Game (also known as “Chicken Game”, in which cooperation is a best response to defection and viceversa). For the Snowdrift Game, Hauert and Doebeli (2004) have shown that local interaction may inhibit co-operation rather than promoting it.

  5. The arrows in the figure indicate the direction in which the composition of the population evolves, so that one can determine which equilibrium obtains for a given initial share of co-operators (and the level of defection by norm-violators).

  6. This is in contrast to the well-mixed population, where all defectors are subject to the same amount of ostracism.

  7. Examples of cooperative behaviour have been identified in a wide range of contexts. These include the management of fisheries (e.g., Acheson 2003; Singleton 1999), forests (e.g., McKean 1986, 2000; Schoonmaker Freudnberger 1993), pastures (e.g., Gilles et al. 1992; Netting 1981; Nugent and Sanchez 1999), and groundwater resources (e.g., Trawick 2003; Marchiori et al. 2012).

  8. Note that while in the traditional model of games on networks, where each node is a player, equilibrium behaviour relates to the Bonacich centrality of nodes (see Ballester et al. 2006), here the equilibrium relates to the Bonacich centrality of links. This is due to the fact that the city-to-source network is bipartite and only the nodes in one of the two independent sets (the cities) are strategic players.

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Authors and Affiliations

  1. Department of Economics, University of Leicester and Universita’ Ca’ Foscari di Venezia, Leicester, UK

    Sergio Currarini

  2. Department of Geography and Environment, Grantham Research Institute on Climate Change and the Environment, London School of Economics and Political Science, Houghton Street, London, WC2A 2AE, UK

    Carmen Marchiori

  3. Grantham Research Institute on Climate Change and the Environment, London School of Economics and Political Science, London, UK

    Alessandro Tavoni

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  1. Sergio Currarini
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  2. Carmen Marchiori
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  3. Alessandro Tavoni
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Correspondence to Sergio Currarini.

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Currarini, S., Marchiori, C. & Tavoni, A. Network Economics and the Environment: Insights and Perspectives. Environ Resource Econ 65, 159–189 (2016). https://doi.org/10.1007/s10640-015-9953-6

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