A Differential Game of Ecological Compensation Criterion for Transboundary Pollution Abatement under Learning by Doing

This paper studies a stochastic differential game of transboundary pollution abatement between two kinds of ecological compensation and the abatement policy, in which the learning by doing is taken into account. Emission and pollution abatement between upstream and downstream region in the same basin is a Stackelberg game, and the downstream regions provide economic compensation for pollution abatement in the upstream region. We discuss the feedback Nash equilibrium strategies of proportional compensation and investment compensation, and it is found that an appropriate ecological compensation ratio can improve the investment level of pollution abatement in the two regions by accumulating experience in the process of learning by doing. In the long term, the investment compensation mechanism is an effective transboundary pollution abatement measure that can continuously reduce the water pollution stock in the upstream and downstream.