Game Theoretic Modeling of Hierarchical Control of Sustainable Development pp. 433-442
Authors: Guennady A. Ougolnitsky
Abstract: The concept of sustainable development means that both economic development and ecological equilibrium must co-exist in the practically infinite period of time. It is almost evident and completely confirmed by experience that these conditions cannot be self-fulfilled and require a permanent control providing the coordination of different incentives, objectives, and criteria. To formalize this idea it is proposed to use a concept of the hierarchically controlled dynamic system (see ). The system consists of: a dynamic system of arbitrary nature; an active subject (Follower) who can affect the dynamic system so that to maximize his payoff function; another active subject (Leader) who knows the state of the dynamic system, tends to provide some requirements concerning this state and to maximize his payoff function in the same time, and can influence Follower’s payoff function and admissible values set (the hypothesis of hierarchy). This concept, as applied to the problem of sustainable development, has the following interpretation. The controlled dynamic system is an ecological-economic system in which some processes of production, resource extraction, and pollution are implemented. Follower is an economic subject who maximizes his payoff function by means of some production process. This process affects the environment and can imply different environmental damages. Leader provides the conditions of sustainable development and may be interpreted as an official agency (federal, regional, or local administration). Besides, Leader also has his own payoff function (due to penalties, tax assignments, and so on).