A hybrid game-theoretic and system dynamics approach for green steel production under government intervention

The complex challenges of global sustainability require a thorough understanding of the dynamic interactions among agents. This study introduces a hybrid model that combines game theory and system dynamics to analyze the sustainable production of green steel. First, a game theory model is presented to evaluate the producer’s market entry decision. Subsequently, the role of the producer innovation efforts and the government governance efforts on the agents’ profit is explored. Based on the results, key insights include: (i) Government taxes and subsidies not only have direct effects on green technology but also indirectly benefit consumers by reducing product prices and increasing social welfare. (ii) The agents’ profit can be increased upon market entry by managing the producer innovation efforts and the government governance efforts. The findings provide a practical guide for policymakers to determine optimal subsidy and taxation levels, enabling producers to adapt their investments in green product production.