Decision-making in safety efforts: Role of the government in reducing the probability of workplace accidents in China

Abstract

A sequential game model is built to analyze the interaction between the government’s effort in safety regulation and the company’s safety effort based on the case in China. An equilibrium solution for the game model is given, and a theoretical analysis concerning the impact of the governments’ regulation on the solution is illustrated. The results show that the probability of workplace accidents can be reduced by increasing unit penalty cost under a given condition. The government should divide workplace accidents into two categories based on the magnitude of the accident: small accidents and large accidents. For accidents classified as small, the larger the magnitude of the accident is, the smaller is the unit penalty cost needed to reduce the accident’s probability. For accidents classified as large, a same unit penalty parameter can be set, which helps to simplify accident management. In addition, the government can reduce the probability of workplace accidents by changing the taxation percentage according to the inflexion point of the relationship between the company’s safety effort and the taxation percentage. The findings of this paper provide some useful insights for Chinese governments on reducing accident probability by resetting their regulation parameters.