Evolutionary game of environmental investment under national environmental regulation in China.

Tao Sun,Qiang Feng

doi:10.1007/s11356-021-14548-4

Abstract

With the rapid development of social economy, the deterioration of environment has become more and more serious; it is urgent to find a balance between economic development and environmental protection. Therefore, enterprises are appealed to invest in environmental protection, and local municipalities are appealed to supervise the environmental behaviors of enterprises, while central government plays a role of regulation. In order to study the preconditions for a better environmental strategy combination of local municipalities and enterprises, an evolutionary game theory was first constructed in this paper, then the evolutionary stable strategy (ESS) of local municipalities and enterprises under different scenarios was examined, and finally a simulation was used to test the results of the analysis. The results indicate that central government's regulation has influence on the strategies chosen by local municipalities and enterprises, the larger the degree of central government's incentives are, the more possible local municipalities and enterprises would choose environment-friendly strategies; and the intensity of central government's regulation, the cost and benefits of local municipalities' supervision, and the cost and benefits of enterprises' environmental investment are the key influence factors.

Highlights

The past few decades have witnessed the rapid development of social economy, while the deterioration of environment has become matters of great concern for the international community especially in developing countries (Lo et al, 2006)
There are two strategies for each player: enterprises can choose to invest in environmental protection (I) which is narrow environmental investment or not invest (NI), local municipalities can choose to supervise enterprises’ investment (S) which is included in broad environmental investment or not supervise (NS)
Under the conditions of information asymmetry and bounded rational, the evolutionary game theory was used to study the environmental investment of enterprises, and an evolutionary game model of local municipalities and enterprises under the regulation of central government was constructed in this paper

Summary

Introduction

The past few decades have witnessed the rapid development of social economy, while the deterioration of environment has become matters of great concern for the international community especially in developing countries (Lo et al, 2006). Due to the positive externality of environmental regulation, there exists the phenomenon of free-riding among different local municipalities: some local municipalities use low intensity environmental regulation to attract capital inflows, promoting local economic growth (Cumberland, 1981) For the public, it includes enterprises, social organizations and individuals, and it mainly refers to enterprises in this paper. Both economic and environmental issues have been widely researched by the theory of evolutionary game, such as carbon taxes (Chen and Hu, 2018), green building scheme design (Wang, 2018b), green supply chain (Babu and Mohan, 2018; Sun et al, 2019), electric vehicles (Fang et al, 2019b) and municipal solid waste source separation (Chen et al, 2018b). Since environmental policies have influence on the economic system, and the influence of economic system on environmental system would affect environmental policies in turn, the environmental regulation system in China would be constantly improving, we believe that evolutionary game theory be a feasible method to study this issue

General game model

Evolutionary game model

Results and analyses

Result

Simulations and discussions

Conclusions