A differential game for basin ecological compensation mechanism based on cross-regional government-enterprise cooperation

Abstract

Cross-regional cooperation among upstream and downstream governments and enterprises is crucial for the efficiently implementation of basin ecological compensation mechanism. In this study, we propose and study a differential game model for basin ecological compensation mechanism based on cross-regional cooperation among governments and enterprises. We have considered three different cooperation settings: mechanisms with no cost sharing, mechanisms with cost sharing and collaborative cooperation mechanism. Under these three settings, all the players' optimal ecological protection efforts, cost sharing rates and optimal revenues are derived. Comparison analysis shows that (1) all the players’ revenues are increasing in the partially ordered set of vectors of cost sharing; (2) the total revenue of the whole system achieves optimal under the collaborative cooperation mechanism. Finally, we conduct several numerical experiments to verify the performance of the solutions to the model, and reveal many interesting managerial insights after hence.