Analysis on Environmental Pollution and Control in China Based on Game Theory

This paper analyzes the problem of environmental pollution control in China based on game theory. The two main participants in the game are the pollutant discharge enterprises and the government, of which government is divided into central government and local government. In this passage, three different game analysis is made. First, a game between enterprises is analyzed. Then, there is a game model made between government and pollutant discharge enterprises. Companies will decide whether to control pollution or not in their own interests, and their decisions will change due to the existence of supervision. Since local governments have the right of independent management, and control part of the administrative and financial power, tax revenue need not be handed over completely to the central government. Therefore, local governments might collude with the local enterprises to evade the supervision of the central government. As a result, a third game model of enterprises, local governments, and the central government is made. Results show that when there is no government supervision, enterprises will always choose to have no pollution control. When the local governments supervise, companies will choose to control pollution. The collusion between local governments and enterprises depends on the number of fines and the cost of collusion. When fines are greater, the two parties will not collude. When costs are higher, the two parties will choose to collude.