Balancing Morality and Economics: Population Games with Herding and Inertia

TL;DR

This paper models the adoption of clean technologies in a heterogeneous population using a multi-type mean-field game, analyzing how behavioral tendencies influence equilibrium adoption levels and the impact of social and economic factors.

Contribution

It introduces a multi-type mean-field game framework with $oldsymbol{eta}$-RNE for modeling diverse agent behaviors in technology adoption.

Findings

Widespread adoption requires low price disadvantage or large herding populations.

Environmental damages alone do not sufficiently incentivize adoption.

Population composition critically influences equilibrium adoption levels.

Abstract

The adoption of clean technologies (CTs) plays an important role in reducing carbon dioxide (CO$_2$) emissions. We study CT adoption in a large population of consumers with heterogeneous behavioral tendencies. We model the interaction among the agents as a multi-type mean-field game in which the agents choose between clean and polluting technology based products and may either behave as rationals (trading off price and moral incentives), herding agents (just follow the majority), or lethargic agents exhibiting inertia toward adopting the new technologies. We characterize equilibrium CT adoption levels using the recently introduced notion of $\boldsymbol{\alpha}$-Rational Nash Equilibrium ($\boldsymbol{\alpha}$-RNE) and its multi-type extension. We then identify a stable subset using the limits of a stochastic turn-by-turn behavioral dynamics. Our results highlight the role of population composition in determining CT adoption. In particular, widespread adoption requires either a sufficiently small price disadvantage for CTs or the presence of a sufficiently large herding population that can be influenced through social awareness programs. Surprisingly, we could prove that environmental damages do not provide sufficient incentives to increase CT adoption.