Governing the green: game theory and mechanism design approaches to carbon compensation in professional golf

Professional golf tours face growing pressure to address their significant carbon footprint, which is primarily driven by extensive, season-long international travel. This paper develops a comprehensive framework to design an optimal, credible, and efficient carbon compensation mechanism for such sports organizations. This paper models the strategic interactions among key stakeholders, the Tour, sponsors, individual tournaments, players, and spectators, with a three-tiered cascade of principal-agent relationships. At the highest level, this paper analyzes the Tour-Sponsor dynamic as a repeated game where reputation for environmental commitment is a capital asset maintained under the threat of contract termination. At the intermediate level, this paper solves the Tour's problem of regulating its tournaments using a mechanism design approach with adverse selection, demonstrating that a non-linear menu of contracts is superior to uniform policies in managing heterogeneous abatement costs. Combining above two models, this paper creates an integrated model for the tour considering both the tournaments and the sponsors. Finally, at the local level, this paper shows how an individual tournament can efficiently delegate its emissions target to players and spectators via a simple internal carbon price. The findings provide a clear roadmap for sports leagues to implement structurally sound decarbonization strategies. The model's key predictions are also shown to be consistent with emerging empirical evidence from the world of professional golf.