Transboundary pollution control under evolving social norms: a mean-field approach

We analyze a dynamic game of transboundary pollution control under endogenously evolving social norms over a finite time horizon. Each player chooses their emission level in order to minimize the social cost of mitigation, which partly depends on the lack of conformity to the social norm establishing the pollution standards at the local level. We show that social norms per se are unable to favor pollution reductions, but if combined with some public reclamation effort, they become very effective in improving environmental outcomes. Indeed, provided that some minimal public reclamation takes place, social norms promote a reduction in the average of the expected value of the local pollution stocks across locations, both in the case in which players rely on an open loop and a closed loop strategy. Moreover, by explicitly characterizing the equilibrium outcome, we formally confirm the reliability of the mean-field approximation of the finite-population dynamics, despite such an approximation introduces some distortion regarding the difference between open and closed loop strategies. We also show that our results are robust to the introduction of individual abatement efforts and heterogeneity across players.