Evolutionary game analysis of the implementation of fiscal policy in resource-based cities

Abstract

Resource-based cities cannot be transformed without reliable support from the government in the form of a suitable fiscal policy. However, when implementing such policies, local officials often resort to favoritism and enterprise rent-seeking. To ensure the appropriate implementation of fiscal policies in resource-based cities, this paper analyzed the relevant mechanisms of supervision by the central government, implementation by the local government, and enterprise participation. It explored the game-theoretic relationship among the three stakeholders to develop a stability strategy, detailing the factors influencing it. By constructing a tripartite game model and executing simulations, we found that the stable equilibrium of the game system was {supervise, fulfill duties, do not bribe} when the direct benefit to local officials was more than twice their salary. Increased supervision by the central financial department helped reduce illegal actions by local officials and enterprises. The punishment coefficient's critical value was between 7 and 8, above which local officials did not resort to favoritism. The critical value of the direct benefits was between 13 and 14. Above this threshold, local officials choose the favoritism strategy. In addition, the costs of supervision and the number of bribes have a small influence on the evolutionary path of the stability strategy of the game system. Therefore, it is important to improve supervision when implementing fiscal policy in resource-based cities and to increase penalties for violations by local officials and enterprises.