Sustainable Management Through Correlated Equilibrium: Strategic Response to Targeting Policy.

The environmental targeting policy by the government engendered a debate over sustainable management. In this paper, a theoretical model of sustainable management is proposed to determine the effectiveness of the targeting policy. We set a game with two players as a benchmark model, where player one is a group of companies that have two types of corporate strategies. The first strategy is to pursue the growth strategy via high-energy consumption. Another strategy is to use an eco-strategy that considers the environment. Player two is a group of consumers who may live life either with the concept of "life energy waste" or "eco-life." First, the Nash equilibrium is derived. Then, we introduce the government as the third player. The research question for this paper is as follows: can governmental policy targeting sustainable environmental management, such as CO2 reduction, be feasible in a society? The model in this paper shows that the governmental targeting policy has a positive effect on the feasibility of sustainable management. This is because a correlated strategy assures that the equilibrium exists between the two cases in the Nash Equilibrium. This also assures that the correlated strategy equilibrium is always higher than the two-person game Mixed Strategy Equilibrium. The announcement of the government may act as huge social investment as long as it is considered credible. This paper shows two case studies on leading companies in Japan and proposes economic concepts to explain the conditions in which an eco-friendly target policy is viable. In the resulting Nash equilibrium, under the condition of correlated equilibrium, one can see harmonization of the targeting policy and lifestyle. This result of correlated equilibrium is fundamentally different from the extant solution given by Pigou Tax or Coase Theorem. [ABSTRACT FROM AUTHOR]