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Overcapacity investment and supervision fluctuation: an evolutionary game approach

Author

Listed:
  • Yingying Ma
  • Zaixu Zhang
  • Jaejin Jang
  • Jie Qu

Abstract

The production enterprise’s capacity overinvestment and governmental supervision failure often lead to overcapacity. The article builds an evolutionary game model between supervision agencies and production enterprises to explain the supervision fluctuation of overcapacity problem. The analytical solutions are found. Numerical examples are provided to illustrate the evolutionary game process with Dynamo and Matlab. In the long-run, the initial condition and the payoffs are two main factors determine the probability of failed supervision. Apart from single punishment measure, more effective measures need to be taken to address overcapacity efficiently.

Suggested Citation

  • Yingying Ma & Zaixu Zhang & Jaejin Jang & Jie Qu, 2020. "Overcapacity investment and supervision fluctuation: an evolutionary game approach," Applied Economics Letters, Taylor & Francis Journals, vol. 27(3), pages 221-227, February.
    • Handle: RePEc:taf:apeclt:v:27:y:2020:i:3:p:221-227
    DOI: 10.1080/13504851.2019.1613486
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