During my MBA at Manchester Business School seventeen years ago, I became fascinated by the game-theory idea that your best decision can depend on what someone else does. At the time, I encountered game theory through business strategy and how organizations anticipate and respond to one another. Ross’s 2023 work describes game theory as a way to understand how one person’s choice shapes another’s best response. Years of working on environmental and water challenges have led me to see game theory through a different lens. Perhaps some of our hardest environmental problems persist because we have not adequately understood the game being played. We can usually tell when water sources are shrinking or ecosystems are under strain. We have the tools, the policies, and more environmental data than ever. But the interested and affected parties who need to act often see different risks, carry different costs, and operate on different timelines. In other words, environmental challenges are both technical and strategic problems shaped by how people respond to one another.
To illustrate, consider a watershed where interested and affected parties all see groundwater levels falling and agree that everyone would benefit from using less. But if one user cuts back while others keep pumping, they bear the immediate cost with no guarantee anyone else will follow. So, continuing to pump can feel like the safer choice, even though widespread use of that same strategy ultimately harms the resource everyone relies on. Similar dynamics arise when companies discharge pollutants into shared watersheds, municipalities compete for limited water supplies, and countries negotiate emission reductions. Ostrom's 1999 work shows that it is too simple to assume people will always chase short‑term individual gains. Ostrom's work shows how cooperation can create change when clear rules, shared norms, strong monitoring, and flexible institutions are in place. The governance challenge is understanding why people choose the strategies they do, especially when other options might deliver faster rewards.
Game theory offers a useful lens for environmental governance by highlighting the strategic interactions that create the conditions for environmental problems and solutions. Game theory helps us ask practical questions about real environmental decisions: Who are the players? What does each one value? What choices do they actually have? And what does each stand to gain or lose by cooperating, delaying, complying, defecting, conserving, or overusing a shared resource? Not every environmental challenge is the same kind of game. Some environmental challenges look like a Prisoner’s Dilemma, where everyone would be better off cooperating, but each actor still has a reason to defect. Others resemble public‑goods or common‑resource problems, where people benefit from collective action yet contribute too little or extract too much. Some challenges are coordination situations where everyone agrees on the environmental goal but disagrees about who should act, who should pay, how benefits should be shared, or when action should begin.
International environmental agreements show that cooperation works mainly when participants see enough benefit in keeping their commitments, while opportunities to free‑ride can weaken collective action. Thus, it is important to understand the type of game you are dealing with before designing the solution. A practical application of game theory to environmental governance can follow these five sequential steps:
- Map the players in the game: identify those who influence or are materially affected by the environmental system and understand their interests, dependencies, information, and relative power.
- Understand the strategies: determine the realistic choices available to each actor: cooperate, conserve, comply, invest, negotiate, delay, defect, overexploit, or free ride.
- Assess the payoffs and risks: determine who benefits, who pays, who carries environmental risk, and why current behavior remains rational. Do not understand payoffs as financial returns alone; they may include political legitimacy, resource security, reputation, livelihoods, regulatory certainty, social acceptance, or avoided costs.
- Redesign the rules: use the diagnosis to modify monitoring, transparency, incentives, sanctions, allocation mechanisms, benefit sharing, participation, or enforcement.
- Evaluate and adapt: monitor whether behavior and environmental conditions actually change, identify unintended consequences, and adjust the governance arrangements accordingly.
The environmental governance game framework is linear when diagnosing a problem but iterative in practice, because changing the rules reshapes strategies, relationships, information, and ultimately the game itself. Once the game is understood, governance can shift from urging better behavior to redesigning the system that makes current behavior appealing. The core principle is that we must change the incentives that make existing choices rational to achieve different environmental outcomes. Environmental governance game also depends on how people interpret and respond to one another. Trust, fairness, legitimacy, communication, social norms, reciprocity, reputation, and expectations about future relationships all shape strategic behavior by making cooperation worth choosing.
The environmental governance game perspective also requires environmental leadership to design the game within which environmental decisions are made, intentionally or unintentionally. For instance, when an environmental outcome is undesirable, leaders can work backward through the system to identify the behavior producing it, the strategies actors are pursuing, why those strategies are rational from their perspectives, who benefits, who pays, who carries the environmental risk, which rules sustain the current behavior, and what could change the strategic direction. Perhaps some environmental problems persist because we repeatedly try to change the outcome while leaving intact the governance system that keeps reproducing it.
Game theory reminds us that environmental governance is about building systems where the right thing is also the smart thing to do. When incentives, information, and institutions align, cooperation becomes the rational path rather than the exceptional one. So, to change environmental outcomes, we first need to change the environmental game. Which part of your environmental game is ready to be redesigned?
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David Tsetse, Ph.D. | SiBI Institute
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