Information contagion and the economics of pollution

Abstract Economic choices involving pollution, like those concerning common resources, relate to the emergence of cooperation among actors. Since pollution propagates in space, the temporal dynamics of economic choices is coupled to the spatial dynamics of pollution. We start from a simple description of the internal representations of the agents proposed by Arthur and Lane (1993) to describe information contagion. The simulations done in this paper allow us to discuss the maximum price that the agents agree to pay for non-polluting devices as a function of pollution, propagation of information and memory characteristics of the agents. We also characterize the spatio-temporal dynamics of choices, market shares and pollution.