Amazon Climate Pledge and Game Theory
The article that inspired the post today was titled “Amazon Makes ‘Climate Pledge’ As Workers Plan Walkout” by NPR and released on Thursday concerning Jeff Bezos, Amazon, and Climate Change. The article sheds light on Amazon’s new commitment to global sustainability, pledging 100% renewable energy by 2030 and buying 100,000 electric delivery vans. While this announcement is the largest climate-related initiative put forth by the company, it occurred only one day before over a thousand workers were planning to walk-out in protest of the company’s current sustainability policies. Additionally, this happened after over 8,000 employees signed an open letter to Bezos reprimanding Amazon’s policies and contracts with oil and gas companies. This is one tangible example of potential game theory played out in the modern business world. It addresses the outcome of a Bezos’s decision depending on the policy direction of Amazon, as well as the choices made by the people interacting with him (or the company). In this case this was the employees attempting to publicly shame and walk-out on Amazon over Bezos’s decision. Simplified, the players can either act or do nothing. The same assumptions apply, the things the parties care about are reflected in the payoffs, both players know everything about the structure of the game, and each player will choose a strategy to maximize their own payoff (rationality). If both parties do nothing, no party gains and no party loses. Given the worker’s sentiments and rhetoric around climate change, this position seems unstable. If player 1 acts (such as implementing a new initiative or taking action), both players have a positive payoff. Amazon avoids negative publicity in the eye of the public and employees are satisfied. If player 1 does not act and player 2 acts, player one faces a negative payoff due to public image concerns. If both players act, player 1 still faces negative consequences and player 2 expends energy. By player 1 acting and player 2 doing nothing, there is a nash equilibria. Amazon avoids public reprimanding and the employees avoid having to organize and expend energy to coerce the company towards action. For amazon, acting is a dominant strategy. The following is a potential payoff matrix:
|
Amazon (Player 1) |
|||
|
Employees (Player 2) |
Do nothing |
Act |
|
|
Do nothing |
(0,0) |
(1,1) |
|
|
Act |
(-2,1) |
(-1,-1) |
|
Bezos ended up rejected ending contracts with energy companies, promoting the scenario of (-2,1) since the workers were planning on doing a corporate walk-out the next day. However, a mutual solution was reached. Instead, Amazon pledged to invest $100 million to protect forests around the world. This brought the game back to the payoff of (-1,1). The employees protested climate change and Amazon acted.
Article link: https://www.npr.org/2019/09/19/762336929/amazon-makes-climate-pledge-as-workers-plan-walkout