Design of Ecological Environmental Protection Incentive Model:

Based on Game Theory and from the Perspective of Collusion

Yi Cao

1a

and Xueru Wen

2,3,* b

1

China Institute of Geo-Environment Monitoring, Beijing 100081, China

2

Institute of Hydrogeology and Environmental Geology, CAGS, Hebei 050061, China

3

Field Research Base for Groundwater Sciences and Engineering, Ministry of Natural Resources, Hebei 050061, China

*

Keywords: Watershed Ecological Environment Protection; Game Theory; Environmental Incentive Model.

Abstract: The coordinated development of river basins requires prioritizing ecological considerations despite

persistent institutional challenges. To engage stakeholders in ecological and environmental protection, it is

crucial to define the responsibilities and authority dynamics between the central government, local

government, and enterprises. Incentive-compatible mechanisms must be established across administrative

units to harmonize environmental protection efforts, promote unified approaches, and contribute to

sustainable basin development.

The central-local government relationship resembles a principal-agent dynamic. To achieve optimal risk

allocation, the central government must exert influence on the local government, enforce contractual

obligations, and establish incentivized frameworks. "Free riding" behavior by local governments in

ecological protection arises from vested interests. By employing rational game theory, it becomes apparent

that an integrated supervisory mechanism allows the central government to maximize basin environmental

utility. Aligning standards among the three government levels and increasing the costs of illicit activities by

enterprises are essential measures to deter collusion.Based on these analyses, several key policy

recommendations emerge. Firstly, elevate the importance of environmental protection performance in the

assessment and evaluation of all government levels. Secondly, establish a comprehensive environmental

protection coordination organization at the basin level. Thirdly, optimize industrial structure adjustment

policies while considering resource and environmental constraints. Fourthly, gradually implement a regional

emission trading market within the environmental regulation framework. Lastly, enhance grassroots

government enforcement capacities regarding environmental protection laws.

Implementing these policies facilitates the coordinated development of river basins, providing a robust

framework for ecological and environmental protection. It ensures sustainable and harmonious basin

development while mitigating the adverse impacts of human activities.

a

https://orcid.org/0009-0006-2096-4941

b

https://orcid.org/0000-0002-8633-6204

1 INTRODUCTION

In order to enhance the ecological and

environmental quality of river basins, governments

at various levels have acknowledged the inherent

trade-off between economic growth and

environmental protection. The challenge lies in

addressing the conflicting interests between survival

and development while simultaneously fostering

cooperation, strengthening complementarity, and

unifying responsibilities and rights. Extensive

research (Fu Y, 2021; Zhang ZM, 2022; Zu J, 2021;

Zu J, 2021; Kong SJ, 2021; Li LQ, 2021; Zhang JH,

2022; Wu SM, 2022; Zhang X, 2021) has identified

several key factors contributing to the deterioration

of watershed environments, which can be

categorized as follows:

Firstly, industrial economic growth often results

in environmental pollution, with governmental

performance evaluations primarily focused on GDP

118

Cao, Y., Wen and X.

Design of Ecological Environmental Protection Incentive Model: Based on Game Theory and from the Perspective of Collusion.

DOI: 10.5220/0013574400004671

In Proceedings of the 7th International Conference on Environmental Science and Civil Engineering (ICESCE 2024), pages 118-129

ISBN: 978-989-758-764-1; ISSN: 3051-701X

metrics.Secondly, the ecological environment is

considered a public good, and the prevalence of

free-riding mentalities leads to inadequate

investment and efforts in comprehensive

environmental protection. Disparities in capital

investment, environmental protection capabilities,

and pollution control levels among local

governments hinder collaborative efforts and joint

initiatives.

Thirdly, the implementation of environmental

protection measures is impeded by the interplay of

interests between governments and enterprises,

hierarchical conflicts between higher and lower

levels of government, and the presence of

rent-seeking collusion and fraudulent practices

within market conditions. Each entity pursues the

maximization of its own interests, which can result

in buck-passing, inefficiency, or even inaction.

Effective mechanism design plays a pivotal role

in achieving overall utility maximization, thereby

facilitating continuous improvement of the basin's

ecological environment. Thus, drawing upon game

theory as a theoretical framework, this study

introduces three levels of environmental protection

incentive models. The application of game theory in

the realm of environmental resource protection

focuses on examining the relationship between

upstream and downstream water usage and the

development of ecological compensation

mechanisms to achieve a balance of interests.

Additionally, it encompasses game analyses of

environmental regulation strategies among local

governments, hierarchical administrative systems,

behavioral choices between the central government

and local governments guided by GDP performance,

and the decision-making processes involving

governmental entities and polluting enterprises (Luo

Y, 2021; Li X, 2021; Hu HJ, 2017; Hong WH, 2021;

Han ST, 2021; Du YT, 2021; Zhou W, 2021; Lu S,

2021; Zhang GH, 2022; Yang L, 2021; Qin JH, 2021;

Ye SS, 2019).

2 CENTRAL GOVERNMENT AND

LOCAL GOVERNMENT

ENVIRONMENTAL

PROTECTION INCENTIVE

MODEL

The central government assumes the responsibility

of formulating pertinent high-level strategies, while

local governments serve as the specific executors of

various policies, regulations, and agreements.

Nevertheless, the presence of "policies at the top and

countermeasures at the bottom," compounded by the

inherent uncertainty associated with ecological and

environmental assessments, renders the central

government the "uninformed party" acting as the

principal, while the local government assumes the

role of the "informed party" as the agent.

Consequently, the principal-agent model proves

valuable in analyzing the strategic interaction

between the central government and local

government in the context of protecting the

watershed's ecological environment.

Premise 1: The central government, acting as the

trustee, does not directly contribute to the

enhancement of the basin's ecological environment.

Instead, the responsibility for ecological

environment protection and improvement lies with

the local government, which perceives the central

government as being risk-neutral while considering

itself as risk-averse.

Premise 2: Due to the lack of direct observation

of the environmental protection actions and their

outcomes by local governments, the central

government faces a dearth of timely, accurate, and

sufficient feedback information.

Let us denote A as the set of possible actions

available to local governments for ecological

environmental protection, where "a" represents a

specific action and "a∈A". The exogenous random

variable θ, representing the state of the natural

ecological environment, is beyond the control of

both the central government and the local

government. Suppose the local government

implements action "a", then the joint influence of

"a" and the exogenous variable θ determines a

quantifiable income denoted as π(a,θ), which serves

as a measure of the outcomes achieved. The function

π is monotonically increasing with respect to both

"a" and θ. In other words, higher values of θ indicate

more favorable natural conditions, while larger

values of "a" represent more favorable ecological

and environmental protection behaviors by the local

government, resulting in greater quantifiable

benefits for the central government.

Given the inability of the central government to

directly observe or measure "a" and θ, the focus is

on designing an incentive contract denoted as "s(π)"

that rewards and penalizes local governments (not

solely in a physical sense) based on observed

outcomes. This incentivizes local governments to

take actions that maximize the expected utility

function of the central government.

Furthermore, the V-N-M (von

Neumann-Morgenstern) expected utility functions of

Design of Ecological Environmental Protection Incentive Model: Based on Game Theory and from the Perspective of Collusion

119

the central government and the local government are

defined as "v[π - s(π)]" and "u[s(π)]", respectively,

where "v' > 0" and "v'' ≤ 0" denote the first and

second derivatives of "v", and "u' > 0" and "u'' ≤ 0"

denote the first and second derivatives of "u". To

provide a more intuitive interpretation of the

mathematical model, let us consider two possible

values for "a": "P" representing "environmental

protection" and "D" representing "environmental

destruction".

() ( )

() () ( ) ()

() () () () () () ()

- ,

.. , -

,- ,-

MAX v p s p f P p a dp

st IR usp fPpadp cP

ū

IC u s p fP p a dp c P u s p fD p a dp c D

















 



 





≥

≥ 





(1)

Let "f(π,a)" represent the density function

associated with the derived distribution function.

The variable "c" signifies the cost of the action,

while "(I)" denotes the desired utility obtained when

the incentive contract "s(π)" cannot be accepted.

Formula (IR) represents the participation constraint,

and Formula (IC) represents the incentive

compatibility constraint.

Let "λ" and "μ" represent the Lagrange

multipliers associated with the participation

constraint (IR) and the incentive compatibility

constraint (IC), respectively. The first-order

condition of the aforementioned optimization

problem is as follows:

() () () ()

,,,-,0vfPpa lufPpa mufP p a mufD p a′+′+′ ′=

To sort out:

() () ( ) ( )

-/ 1-,/,vpsp usp l m fDpa fPpa

  



′



′=+





(2)

To achieve the objectives of ecological and

environmental protection, the central government

must impose constraints on local governments in at

least two dimensions. Firstly, there is the

participation constraint, which ensures that the

expected utility gained by local governments from

accepting the incentive contract is not lower than the

maximum expected utility attained without

accepting the contract. The second dimension

involves the conflicting choices that local

governments face, often referred to as the

opportunity cost of environmental protection. It

pertains to the trade-off between pursuing their own

interests and engaging in environmental protection

efforts.

Furthermore, the incentives provided to local

governments must align with the constraints they

face. Given that the central government lacks the

ability to directly observe the specific behaviors and

natural conditions of local governments, local

governments will always strive to maximize their

expected utility under any given incentive contract.

Unless the central government offers adequate

incentives to local governments regarding

environmental protection policies, it is unlikely that

the efforts and actions of local governments in

related endeavors will meet the desired expectations.

In Scenario 1, when the behaviors of local

governments are observable, the central government

can enforce the required actions through compulsory

contracts. This entails the diligent implementation of

collaborative work plans for ecological and

environmental protection in the basin, as issued by

the central government. Corresponding payments are

provided by the central government to ensure that

the local government is either "profitable" or

exposed to the lowest possible risk.

In this context, when the central government can

monitor the actions of local governments and the

associated risks are minimal, a system is established

where local governments achieve the minimum

environmental targets (guaranteed income), while

the central government assumes the full risk for

subpar environmental protection (residual income).

Through the enforcement of compulsory contracts,

the central government can effectively compel local

governments to align their actions with the

requirements set forth by the central government.

So if I set

μ

equal to 0, I get

() ()

-/us us

ππ π

λ



′





′=

(3)

In Scenario 2, when the behaviors of local

governments are unobservable, information

asymmetry arises between the central government

and the local government, resulting in the

coexistence of risks and incentives. The optimal

risk-sharing contract is determined based on the

observed outcomes, whereby greater efforts by the

local government lead to higher outputs. When the

ICESCE 2024 - The International Conference on Environmental Science and Civil Engineering

120

local government assumes all the risks, the contract

incentives are sufficient, enabling the central

government to maximize its expected outcomes.

However, when local governments bear some of the

risks, their level of effort will depend on the

incentives provided by the central government.

In reality, μ=0 does not exist because of the

asymmetrical information between the principal

(central government) and the agent (local

government), indicating that μ>0. We represent the

risk-sharing contract under μ=0 and μ>0 as s(π) and

sλ(π), respectively. If the density function fP(π,a) is

greater than or equal to fD(π,a), the contract s(π) is

greater than or equal to sλ(π). Conversely, if fP(π,a)

is less than or equal to fD(π,a), then s(π) is less than

or equal to sλ(π). For a given output, if the

probability fD(π,a) of the agent "damaging the

environment" is greater than the probability fP(π,a)

of "protecting the environment," the agent's expected

returns will be adjusted downward, and vice versa.

In summary, to achieve Pareto optimal risk

sharing, the central government needs to effectively

"compel" local governments to implement

"contracts" that involve the decomposition of

environmental protection tasks into multiple layers.

This requires the central government to have

comprehensive and accurate evaluations of the

ecological and environmental protection behaviors

of local governments through relevant indicators or

actual observations. However, within the current

governance system, task decomposition is primarily

carried out by local governments, rendering the

existence of compulsory contracts no longer feasible.

Furthermore, the central government still faces

considerable uncertainties in assessing watershed

ecological environmental protection. Consequently,

the present approach is limited to implementing

overall constraints on major environmental

indicators. Until the two levels of government

achieve the Pareto optimal risk-sharing ratio, there

remains significant room for strategic interaction

and negotiation.

3 GAME ANALYSIS BETWEEN

UPPER AND LOWER RIVER

BASIN LOCAL

GOVERNMENTS

3.1 General Forms of Games Among

Local Governments

The concept of a watershed is applicable to both

water resources and atmospheric environments. In

this context, it is assumed that both the upstream and

downstream governments have a comprehensive

understanding of each other's strategic space and

benefit functions. Consequently, the game of

ecological compensation between the upstream and

downstream governments in the basin can be

characterized as a static non-cooperative game with

complete information. By considering the income

functions of both parties, a cost-benefit matrix can

be established. The upstream government has two

strategic choices: protection and non-protection,

while the downstream government has two strategic

choices: compensation and non-compensation.

The original income of the upstream government

is denoted as "b," and it incurs a direct cost "c" for

implementing protection measures, as well as an

opportunity cost associated with potential losses.

Environmental improvement also yields benefits for

the upstream government. The original revenue of

the downstream government is represented by "b

0

,"

and it incurs a cost "c

0

" for providing compensation

to the upstream government. Additionally, the

upstream environmental protection efforts result in

external revenue denoted as "b

1

" through

environmental improvement. When the upstream

government selects the "no protection" strategy and

the downstream government chooses the

"compensation" strategy, the corresponding payoff is

(b+c, b

0

+c). On the other hand, if the upstream

government selects the "no protection" strategy and

the downstream government chooses the "no

compensation" strategy, the payoff becomes (b

0

, b).

When the upstream government chooses the

"protection" strategy and the downstream

government selects the "compensation" strategy, the

respective benefits are (b

0

-c

0

+b

1

, b+b

i

-c+c

0

).For

upstream governments, if the benefit "b

i

" outweighs

the cost "c," they will undoubtedly opt for protection

strategies, regardless of whether downstream

governments provide compensation or not. In

practice, the income lost by the upstream

government due to environmental protection

measures far exceeds the compensation provided by

the downstream government, that is, b

i

<c. Therefore,

in the absence of external constraints, the upstream

government, driven by rational decision-making,

tends to pursue a non-protection strategy to

maximize short-term self-interest gains.

Design of Ecological Environmental Protection Incentive Model: Based on Game Theory and from the Perspective of Collusion

121

Table 1: Game models of upstream and downstream governments

Upstream government

Protection Not protect

Downstream

government

Com

p

ensation

(

b

0

-c

0

+b

1

,b+b

i

-c+c

0

)

(

b

0

-c

0

,b+c

0

)

Non-com

p

ensation

(

b

0

+b

1

,b+b

i

-c

)

(

b

0

,b

)

The downstream government finds it

advantageous not to provide compensation when

the upstream government implements protection

strategies. Similarly, even if the upstream

government does not engage in protection

measures, the downstream government will still

choose not to provide

compensation. Consequently,

unless the externality income (b

1

) resulting from

upstream environmental improvement is greater

than zero, downstream governments tend to

free-ride and lack sufficient motivation for

ecological compensation. Although the

establishment of an ecological compensation

mechanism can effectively alleviate the conflict

between ecological environmental protection and

economic and social development in the water

source areas of river basins, practical

implementation is hindered by ambiguous

collaborative positioning at the district and county

levels, as well as institutional and procedural

obstacles. Additionally, technical challenges arise

in measuring the value of ecological services and

determining the scope of compensation, which

restricts the extent of ecological compensation

from downstream to upstream. Currently,

negotiations are primarily limited to specific

"points and lines" within a certain timeframe, and

progress on a broader scale has been sluggish.

3.2 Game between Players and Local

Governments

The interactions among local governments in the

basin can be compared to a "smart pig game" given

the presence of multiple administrative levels as well

as significant variations in social and economic scale

and structure. Let us denote A as a subset of local

governments in the basin characterized by a

developed economy and abundant environmental

protection funds, while B represents a larger set of

local governments in the basin with an

underdeveloped economy and limited investment in

environmental protection funds.

We assume that the overall ecological

environment level of the basin is denoted as X, and

the level of improvement in the ecological

environment resulting from human action is X+R.

Furthermore, X+P represents the input cost of

environmental protection required to achieve the

corresponding level. For any local government in the

basin, without any efforts, its expected income is

E(X+λ

1R

), where λ

1

represents the probability that

the local government does not engage in

environmental protection measures but still benefits

from the improvement in the ecological environment.

On the other hand, the probability that the local

government actively participates in environmental

protection and contributes to the improvement of the

ecological environment is denoted as λ

2

, with the

associated cost level being E(X+λ

2P

). In general, we

expect that λ

2

≥λ

1

, indicating that local government

investment in environmental protection is conducive

to the overall improvement of the basin's ecological

environment.

For local government A, it will choose to

actively strengthen environmental protection and

participate in watershed environmental governance

to improve the overall ecological environment level

as long as it satisfies the condition λ

2P

≥ λ

1r

, or

equivalently, P≥ λ

1r

/λ

2

, and P<R. However, for local

government B, its investment in environmental

protection funds is limited and has little impact on

the probability of improving the overall level of the

basin's ecological environment. In this case, we can

simplify the situation by assuming that λ

2

=λ

1

. To

motivate local government B to engage in

environmental protection, it must meet the condition

P≥R. As a result, the cost of environmental

protection exceeds the benefits, and local

government B chooses not to pursue optimal

environmental protection strategies.

The reason why local government B tends to act

as a "free rider" is that it perceives "more gains than

losses" in actively engaging in environmental

protection. It expects other local governments to

increase their investment in environmental

protection and improve the ecological environment

of the basin, from which it can benefit without

incurring the associated cost. On the other hand, the

intensity of environmental protection investment by

local government A determines whether the

ecological environment of the basin can be improved.

As a result, local government A bears the cost of

increasing environmental protection investment,

ICESCE 2024 - The International Conference on Environmental Science and Civil Engineering

122

which benefits not only itself but laso other local

governments, including B. If local government A

chooses not to act or adopts the same behavior as

local government B, all local governments in the

basin may refrain from increasing their

environmental protection efforts, making it

challenging to achieve the goal of improving the

ecological environment.

There are two potential solutions to address this

issue. First, implementing the principle of "those

who engage in environmental protection will

benefit" More strictly. This approach can help to

partially curb the issue of unearned gains, but it

requires linking environmental protection to

performance rewards and penalties, ensuring a better

balance between costs and benefits. The second

solution involves clarifying the responsibilities and

tasks of each actor and holding them accountable for

their lack of action in accordance with assessment

requirements, reward systems, and penalties.

Ultimately, the core of the local government game

lies in defining and allocating property rights,

including ownership, use, income, and disposal

rights of ecological environmental resources.

Breakthroughs in the basin's fiscal and tax system,

assessment mechanisms, and existing interest

patterns are needed to address this challenge

effectively (Yuan RX, 2021; Guo H, 2020; Wang CG,

2022; Kim Y, 2022; Yu Y, 2022; Yang C, 2021; Shi

SH, 2022; Zhang PP, 2020; Xie FF, 2021; Yang HF,

2022; Wang N, 2021; Yu HS, 2021; Zhao YW, 2020).

Let us consider the scenario without any external

constraints. In this context, we define Uc as the

ecological and environmental benefits accruing to

downstream governments, mc as the level of

implementation of environmental protection

measures, p as the level of environmental damage,

g(mc) as the cost associated with protection efforts,

and T(p) as the expenditure required for ecological

compensation. On the other hand, Ud represents the

environmental benefits received by the upstream

government, H(md) denotes the revenue function of

the upstream government, and md represents the

level of implementation of environmental protection

measures. When the upstream government

successfully implements protective measures, it

becomes eligible for compensation from the

downstream government. It is important to note that

environmental damage primarily impacts the

downstream region. Additionally, j(md) represents

the additional cost incurred by ecological

compensation for environmental protection, while

T(p) signifies the ecological compensation received.

max ( ; ) - ( ) - ( )Uc F mcp gmcTp=

(4)

max ( ) ( ) - ( )Ud H mdTpjmd=+

(5)

It is evident that when the sum of ecological

compensation (T(p)) and protection costs (g(mc)) is

relatively low, the environmental benefits received

by downstream governments primarily rely on the

extent of environmental damage caused by upstream

governments. On the other hand, the ecological

benefits received by downstream governments are

determined by the difference between ecological

compensation (T(p)) and the additional protection

costs (j(md)). It is observed that the ecological

compensation provided by upstream governments is

insufficient to cover the extra costs incurred for

protection, rendering the situation "worth the cost."

This highlights the presence of conflicting interests

between the two parties. As the negative impact of

upstream non-protection escalates and downstream

motivation for ecological compensation increases, it

becomes rational for upstream governments to

disengage until both parties return to the negotiation

table. However, the irreversible or costly nature of

ecological degradation exacerbates the

aforementioned contradictions.

To address these challenges, the central

government can be reintegrated as the

decision-maker within the integration mechanism. In

this framework, "a" represents the interest subject

representing policy makers, while "b" represents

local governments responsible for policy

implementation. Ua and Ub denote the revenue

generated by the central government and local

government, respectively. The revenue function of

the central government is denoted as I(ma; p), where

ma signifies the central government's oversight of

local governments, and p represents the degree of

environmental resource damage and waste.

Furthermore, ma is a function of p, represented as

ma(p). The maximum utility function of the central

government can be expressed as maxUa=I(ma;

p)-i(ma)-L(p), where i(ma)+L(p) represents the total

costs incurred by the central government.

Specifically, i(ma) denotes the costs associated with

central government supervision over local

governments, which increase with the magnitude of

ma. Meanwhile, L(p) indicates that environmental

damage prevents the central government from

achieving resource protection targets.

Similarly, the maximum utility function of local

governments can be expressed as maxUb=E;

ma)-e(ma)-S(mb). Here, E(mb; ma) represents the

revenue function of local governments, where mb

signifies the level of environmental protection

intensity, and mb is a function of ma denoted as

Design of Ecological Environmental Protection Incentive Model: Based on Game Theory and from the Perspective of Collusion

123

mb(ma). Increased supervision or penalties from the

central government prompt local governments to

invest more in ecological and environmental

protection. The total costs incurred by local

governments are represented by e(ma)+S(mb),

where e(ma) refers to the additional protection costs

due to central government oversight, and S(mb)

represents the costs borne by local governments for

environmental protection. The equilibrium

relationship that maximizes utility for both parties

can be expressed using the following formula.

max ( ; ) ( ) ( )Ua I map i maLp=−−

(6)

max ( ; ) ( ) ( )Ub E mbmaemaSmb=−−

(7)

() 0

IIi

mamaLp

mapma

EEe

mbmaSmb

mbmama



∂∂∂

′′′

+− − =



∂∂∂



∂∂∂



′′′

+− − =



∂∂∂



(8)

The solution to this problem lies in identifying a

set of optimal values that simultaneously establish

ma

*

=ma(p

*

) and mb

*

=mb(ma

*

). This entails

achieving a delicate equilibrium among the degree

of ecological and environmental damage, the level

of central government supervision, and the extent of

protection input by local governments. By attaining

this balance, all parties involved can concurrently

maximize their utility..

4 GAME ANALYSIS BETWEEN

LOCAL GOVERNMENT AND

ENTERPRISE

In the context of ecological environmental

protection, local governments play a crucial role in

supervision and management, while enterprises

serve as the ultimate subjects of behavior (Liu M,

2021; LI WY, 2019; Zhou NQ, 2019; Zhang Y, 2022;

Li B, 2021; Dang XY, 2021; Dang YX, 2022; Cheng

CS, 2021). However, during the process of law

enforcement, regulatory bodies at various levels

within the river basin possess significant

discretionary power. This discretion often leads to a

lack of uniform objective standards and subjective

inaction. For instance, the phenomenon of "APEC

Blue" resulted from the stringent joint prevention

and control efforts undertaken by three local

governments. In many cases, information asymmetry

exists between the government, regulators, and

enterprises, making it challenging for the

government to effectively control the enforcement

efforts of regulators. This information asymmetry

can also give rise to collusive activities between

regulators and enterprises to gain illegal profits, as

well as instances of regulatory oversight and

ineffective investigation of environmental pollution

incidents (Yu SK, 2022; Niu Y, 2021; Shima Nasiri,

2022; Liu QS, 2021; Xu J, 2021; Wei P, 2022; Deng

XB, 2021; Wei C, 2021; Yuan SH, 2021).

4.1 Model Establishment and

Hypotheses

Firstly, it is assumed that there is no collusion

between regulators and enterprises to fabricate data.

In this scenario, if the local government does not

conduct any inspections, the additional income

obtained by regulators and enterprises is zero, while

the government's income (representing the degree of

environmental protection goal attainment) is denoted

as R. The income of the government, regulators, and

enterprises is recorded as: (R, 0, 0).

Secondly, assuming no collusion between

regulators and enterprises, but the government still

carries out inspections, resulting in increased costs

denoted as S, the income of the government,

regulators, and enterprises is recorded as: (R - S, 0,

0).

Thirdly, if the regulator and the enterprise

conspire to fabricate data, and the government does

not conduct any inspections, the respective earnings

of the regulator and the enterprise are denoted as U

and V. In this case, the income of the government,

regulator, and enterprise is recorded as: (0, U, V).

Fourthly, if the regulator and the enterprise

collude to fabricate data, even though the

government conducts inspections, it fails to identify

the issue. Then, the income of the government,

regulator, and enterprise is denoted as (-S, U, V).

Fifthly, if the regulator and the enterprise collude

to fabricate data, the government conducts

inspections, and the collusion is discovered and

punished. Then, the income of the government,

regulator, and enterprise is denoted as (-S + G, -O,

-T), where G represents the income from

government fines, -O represents the punishment

imposed on the regulator, and -T represents the

losses incurred by the enterprise as a result of

investigation and punishment.

Lastly, let P

1

represent the probability of

collusion between regulators and enterprises, P

2

represent the probability of government inspections,

and P

3

represent the probability of government

ICESCE 2024 - The International Conference on Environmental Science and Civil Engineering

124

inspections uncovering collusion. The tripartite

game model is presented in Table 2.

Table 2: Three-party game model

supervisor

Check (P

2

) Do not check (1-P

2

)

Verify (P

3

)

Failure to verify

(

1-P

3

)

Conspiracy to

commit fraud

(P

1

)

(R-S+G,-O,-T) (-S,U,V) (0,U,V)

No conspiracy

to defraud

(1-P

1

)

(R-S,0,0) (R-S,0,0) (R,0,0)

4.2 Model solving

Let us consider the scenario where the probability of

collusion between regulators and enterprises is

denoted as P

1

. In this case, the government's income

is determined by two situations: when conducting

inspections and when not conducting inspections,

which are represented as

π

1

and

π

2

, respectively.

( ) ()()()()()

()

11 3 3 1 3 3

21

11 1

1

PRSGP S P P RSP RS P

PR

π

 





=−+−−+− −+−−

−







=





(9)

When the expected benefits of government

verification and non-verification are the same, it is

the optimal probability of collusion between

regulators and enterprises when the government is in

game equilibrium.Setting

π

1

=

π

2

, we obtain the

following.

*

/

133

PSRPPG=+

(10)

Suppose that the probability of the government's

verification is P

2

, then the enterprise's income from

collusion is

π

3

and that from no collusion is

π

4

,

respectively:

()

(

)

(

)

11

323 3 2

0

4

PP T PV PV

π





= −+− +−









=





(11)

When the expected returns of enterprises'

collusion and non-collusion are the same, it is the

optimal probability of the government's verification

when enterprises are in game equilibrium. Let

π

3

=

π

4

, we get:

()

*

/

23

PV TVP=+

(12)

Suppose that the probability of the government's

inspection is P

2

, then the benefits of collusion by

supervisors are

π

5

and

π

6

, respectively:

() ( ) ( )

523 3 2

6

11

0

PP O U P U P

π





=−+−+−





=







(13)

When the expected benefits of collusion and

non-collusion of regulators are the same, that is,

when the regulators are in game equilibrium, the

optimal probability of the government's verification.

Let π

5

= π

6

,, we get:

()

*

/

23

PUUOP=+

(14)

According to equations (10), (12) and (14), Nash

equilibrium of the tripartite game model of

government, regulators and enterprises can be

obtained as follows:

()

*

133

*

23

/ *

/

PSRPPO

PVTVP



=+









(15)

Or

()

*

133

*

23

/ *

/

PSRPPO

PUUOP



=+









(16)

The formula presented earlier demonstrates that

the probability P1 of collusion between regulators

and enterprises is directly proportional to the cost S

incurred by the government during inspections.

Conversely, the probability P

3

of collusion being

detected during inspections is inversely proportional

to the government's income R and the penalty

income O. This implies that higher enforcement

capabilities and technical proficiency of the

government in environmental protection verification

lead to a lower likelihood of collusion between

regulators and enterprises. However, if the cost of

government inspections becomes excessively high,

the frequency of inspections may be reduced to

mitigate expenses, consequently resulting in a

corresponding decrease in the probability of

Design of Ecological Environmental Protection Incentive Model: Based on Game Theory and from the Perspective of Collusion

125

collusion between regulators and enterprises.

Ultimately, this may lead to a decline in the

government's anticipated benefits from

environmental protection.

According to the formula, when P

2

is lower than

the Nash equilibrium probability P

2

*

(i.e., V/(T+V)P

3

or U/(U+O)P

3

), the government's inspection

probability is below the equilibrium level, prompting

enterprises to choose collusion. Conversely, if P

2

is

greater than the smaller P

2

*

value, enterprises opt not

to collude. Assuming a constant value for V, an

increase in the loss T incurred due to collusion

results in a higher verification probability P

3

during

inspections, causing V/(T+V)P

3

to decrease and

consequently reducing P

2

*

. Similarly, if the loss O

resulting from collusion becomes larger, the

likelihood of collusion decreases. Only when the

government's verification probability P

2

falls below

the smaller P

2

*

value, enterprises are more likely to

collude.

Assuming a significant increase in V, leading to a

corresponding increase in P

2

*

, it is essential for the

government to simultaneously raise the actual

verification probability P

2

. Failing to do so may

encourage regulators and enterprises to engage in

fraudulent activities. If V reaches a sufficiently high

level and T becomes negligible in comparison,

enterprises may continue to engage in pollution even

if the probability of investigation and verification

(P

3

) is 1. Therefore, reducing collusion hinges on the

government increasing the penalties for collusion,

while also augmenting the losses incurred by

enterprises during investigations and punishments

(i.e., raising the costs of illegal environmental

pollution) serves as a potent strategy to deter

excessive pollution by enterprises.

5 CONCLUSIONS

5.1 Enhancing the Weight of

Environmental Protection

Performance in Government

Assessment and Evaluation

The resolution of ecological and environmental

issues in river basins requires active participation

and supervision from the central government. Firstly,

the central government should augment the

significance of environmental performance in the

assessment and evaluation of provincial

governments. This can be achieved through the

implementation of measures such as "one vote veto"

and conducting interviews with government officials.

Furthermore, this emphasis on environmental

performance should be gradually extended to local

governments at the grassroots level. In addition,

preferential policies should be introduced to

incentivize local governments to increase their

investments in environmental protection. These

initiatives will serve to guide decision-making

behaviors at all levels of government towards

actions that facilitate ecological and environmental

improvement. Simultaneously, collaborative

development assessment indicators should be

established to encourage the participation of

governments at all levels in watershed

environmental protection. The central government

can also establish incentive contracts, such as the

river basin ecological and environmental protection

fund, which will be jointly funded by local

governments and the central government. This fund

will not only address the issue of insufficient funds

for ecological compensation but also serve as a

financing source for reward and punishment

mechanisms in environmental protection

assessments. It is important to note that the

assessment of environmental protection performance

and collaborative development is fundamentally a

subjective evaluation of ecological environment

improvement, rather than an objective demonstration.

Thus, achieving a broad consensus among all

stakeholders will guide the overall improvement of

the basin's ecological environment in a positive

direction.

5.2 Establishing Comprehensive

Environmental Protection

Coordination Institutions at the

River Basin Level

Efforts should be made to establish a comprehensive

environmental protection coordination body that

spans administrative river basins. This body should

comprise relevant ministries and provincial-level

governments, with dedicated functions for river

basin management, including planning, monitoring,

coordinating, and implementing major

environmental protection projects within the basins.

It is crucial to promptly define the ecological spatial

protection red line for river basins, clarify the roles

and responsibilities of local governments, and

prioritize environmental capital investment,

environmental protection capacity, and pollution

control in key river basins. These actions will

contribute to the shared long-term goal of

coordinated economic, social, and environmental

ICESCE 2024 - The International Conference on Environmental Science and Civil Engineering

126

development among the river basins. The

coordination body should explore the establishment

of mechanisms for environmental protection

cooperation and cooperation demonstration zones. It

should promote the protection of the environment in

economically developed areas while assisting less

developed areas in improving their ecological

environments. Exploring the feasibility of two-way

ecological compensation is also essential. For

instance, compensating downstream areas for

meeting water quality standards or compensating

upstream areas if they fail to meet the required

standards. Additionally, exploring mechanisms for

cross-border compensation, particularly in areas

with persistent air quality issues, can further

contribute to environmental improvement.

5.3 Enhancing Industrial

Restructuring Policies within

Resource and Environmental

Constraints

From an industrial perspective, the primary objective

of industrial structural adjustment is to mitigate the

ecological burden. Firstly, macro-control measures

should be optimized while considering resource and

environmental constraints, and industrial structure

adjustments should be made while accounting for

carrying capacity. National investment policies

should prioritize the rapid development of the

modern service industry and the ecological

environmental protection industry. Secondly, there

should be a strong emphasis on promoting cleaner

production, resource recycling, and upgrading

traditional industries and industrial parks. Lastly, it

is necessary to establish a unified threshold for

industrial environmental protection to prevent the

spatial transfer of polluting enterprises during the

relocation of non-capital functions and industrial

shifts. Industries that cause significant pollution and

damage to the water, air, and land environment

should be included in a planned manner on the list of

prohibited new developments within the river basin.

5.4 Gradually Establishing a Trading

Market for Drainage Basin

Emission Rights under

Environmental Control

As previously mentioned, enterprises play a crucial

role in implementing environmental protection

measures, and environmental control significantly

influences enterprise behavior. It is essential to

intensify administrative interventions and increase

the cost of environmental pollution for enterprises.

Moreover, enterprises can actively contribute to

improving the ecological environment. The

government can procure environmental protection

services from enterprises to enhance the

effectiveness of environmental protection funds

utilization. To facilitate this, it is advisable to guide

the establishment of a trading market for drainage

basin emission rights, controlling pollution levels

within a predetermined limit. Each enterprise within

the basin would be allocated specific emission

credits. If an enterprise exceeds its emission limit, it

would be required to purchase additional emission

quotas from the market. Conversely, enterprises with

effective environmental protection measures and

surplus emission credits can sell their excess quotas

in the market. This approach encourages enterprises

to strengthen their environmental protection

capabilities and reduce pollution.

5.5 Enhancing Environmental Law

Enforcement at the Grassroots

Level

To effectively implement environmental protection

measures at all levels of government, it is crucial to

address the shortcomings in environmental law

enforcement teams at the community level. This can

be achieved by allocating sufficient resources for

personnel and funding, enhancing technical skills,

and strengthening overall law enforcement capacity.

For instance, in accordance with the new

Environmental Law, governments at or above the

county level should establish public monitoring and

early warning mechanisms for environmental

pollution while formulating corresponding early

warning plans. Considering the uncertainty

surrounding the ecological environment and its

public goods nature, procedures for public

supervision and information disclosure should be

further improved. It is important to involve

stakeholders such as representatives of NPC

deputies, environmental law enforcement officers,

experts, lawyers, judges, enterprises, media,

environmental organizations, volunteers, and other

relevant parties in the demonstration and

decision-making processes regarding significant

ecological and environmental protection issues.

Design of Ecological Environmental Protection Incentive Model: Based on Game Theory and from the Perspective of Collusion

127

ACKNOWLEDGMENTS

The research work was greatly supported by

Research and Development Fund Project of

China

Institute of Geo-Environment Monitoring:

Research on Geoscience Knowledge graph for the

Improvement of Land Spatial Governance

Capability.

REFERENCES

Fu Y, 2021. Exploration on the Supervision Mechanism of

"Non-agriculturization" and "Non-grain Production"

of Cultivated Land in China——Based on Survey of

Ningxia Hui Autonomous Region. Natural Resource

Economics of China, 34(10): 4-11.

Zhang ZM, 2022. Suggestions for Implementing

Differentiated Policies in the field of Natural

Resources for Rural Revitalization——A Research

Report from Guizhou. Natural Resource Economics of

China, 35(02): 57-66.

Zu J, 2021. Evaluation on the Implementation of the 13th

Five-Year Plan for Land and Resources from the

Public Perspective. Land and Resources Information,

(11): 23-28.

Zu J, 2021. Challenges and Strategies of Cultivated Land

Protection in the BohaiRim Economic Zone in the

Post-pandemic Era. Land and Resources Information,

(12): 12-17.

Kong SJ, 2021. Research Progress of Economic

Compensation for Cultivated Land Protection. Land

and Resources Information, (09): 29-34.

Li LQ, 2021. Analysis of Spatial-temporal Variation

Characteristics and Driving Forces of Cultivated Land

in Guilin. Land and Resources Information, (06):

18-26.

Zhang JH, 2022. Research on the Spatial Pattern of

Cultivated Land Grade in the Coastal Plain——A

Case Study of Huanghua City of Hebei Province.

Natural Resource Economics of China, 35(03): 38-44.

Wu SM, 2022. Strengthening the "Trinity" Protection of

Cultivated Land in the New Era——Based on the

Innovation Practice of Jiangsu Province. Natural

Resource Economics of China, 35(01): 50-56,89.

Zhang X, 2021. Problems and Suggestions for Cultivated

Land Protection under the New Development

Trend——Thoughts on the Construction of

Supervision System for Cultivated land Protection.

Land and Resources Information, (12): 5-11.

Luo Y, 2021. Research on the Estimation of Asset Value

of Cultivated Land Resource in Sichuan Province.

Natural Resource Economics of China, 34(03):51-57.

Li X, 2021. Dynamic Analysis of Natural Capital Based

on Improved Three-dimensional Ecological

Footprint——Taking the Resource-exhausted City

Xuzhou City a san example. Natural Resource

Economics of China, 34(05): 24-31,88.

Hu HJ, 2017. Comments on Land Reclamation Research

under the Merger of “Two Cases” Based on the

Journal Literature Statistics from 1996 to 2016. Metal

Mine, (12): 147-152.

Hong WH, 2021. Study on the Distribution and

Influencing Factors of Selenium Based on the

Geochemical Method of Land Quality: A Case Study

of Tongren Area. Metal Mine, (12): 160-168.

Han ST, 2021. Multifunction Evaluation and Diagnosis of

Obstacle Factors of Cultivated Land in Shaanxi

Province. Land and Resources Information, (12):

23-30.

Du YT, 2021. Practice and Exploration of Mine-Land

Integration in Yixing City. Modern Mining, 37(05):

6-10.

Zhou W, 2021. International Experience Insights on

Cultivated Land Ecological Protection and

Compensation——Based on the Common

Agricultural Policy of EU. Natural Resource

Economics of China, 34(08): 37-43.

Lu S, 2021. Method Research and System Design on

Rectification of Building Houses By Occupying

Cultivated Land Indiscriminately. Land and Resources

Informatization, (02): 48-53.

Zhang GH, 2022. Main Causes and Mechanism for the

Natural Oasis Degeneration in the Lower Reaches of

Northwest Inland Basins. Hydrogeology and

Engineering Geology, 49(05): 1-11.

Yang L, 2021. Study on Adjustment Price Calculation of

Supplementary Cultivated Land in Xinjiang Uygur

Autonomous Region. Land and Resources

Information, (08): 32-38.

Qin JH, 2021. Sensitivity Evaluation of Cultivated Land

From a Perspective of “Agricultural Production-Urban

Development-Ecological Maintenance” Based on GIS.

Journal of Henan Polytechnic University(Natural

Science), 40(04): 78-88.

Ye SS, 2019. Ecological Environmental Cost Accounting

of Mining Area Based on the Green Mine: A Case

from a Mining Area in the North China Plain. Metal

Mine, (04): 168-174.

Yuan RX, 2021. Evaluation of Shallow Geothermal

Energy Resources in The Beijing-Tianjin-Hebei Plain

Based on Land Use. Journal of Groundwater Science

and Engineering, 9(02): 29-139.

Guo H, 2020. Research Progress on the Soil Vapor

Extraction. Journal of Groundwater Science and

Engineering, 8(01): 57-66.

Wang CG, 2022. The Analysis and Evaluation on the

Features of the Heavy Metals in Coal Mining Soil in

the Middle Reaches of the Yellow River. Mining

Safety &Environmental Protection, 49(05): 124-130.

Kim Y, 2022. Spatial Variation and Storage

Characteristics of Soil Nitrogen in a Small Watershed

in Danjiangkou Reservoir Area. Journal of Henan

Polytechnic University (Natural Science), 41(05):

87-95.

Yu Y, 2022. Applications of 3D Laser Scanning

Technology in The Extraction of Vegetation

ICESCE 2024 - The International Conference on Environmental Science and Civil Engineering

128

Parameters. Journal of Henan Polytechnic

University(Natural Science), 41(04): 51-57.

Yang C, 2021. Geochemical Characteristics and Its

Influencing Factors of Soil Selenium in Xiuwen

County,Guizhou Province. Modern Mining, 37(03):

23-26,34.

Shi SH, 2022. Heavy Metal Migration and Soil Pollution

Assessment in an Intensive Mining Area in the

Southwest China. Metal Mine, (02): 194-200.

Zhang PP, 2020. Effects of Coal Mining Subsidence on

Soil Aggregates and Organic Carbon. Metal Mine,

(12): 203-209.

Xie FF, 2021. Spatial Variation of Soil Properties and

Crop Response in Mining Subsidence area. Journal of

Henan Polytechnic University(Natural Science),

40(04): 89-97.

Yang HF, 2022. Assessment of Water level Threshold for

Groundwater Restoration and Over-exploitation

Remediation the Beijing-Tianjin-Hebei Plain. Journal

of Groundwater Science and Engineering, 10(02):

113-127.

Wang N, 2021. Mine Environment Investigation and

Research Based on Remote Sensing Technology: A

Case Study of the Jidong Iron Mine. Metal Mine, (10):

192-198.

Yu HS, 2021. Research on Ecological Protection and

Restoration of Abandoned Open-pit Mine——Based

on the Ecological Restoration Project of Kadingshan

Mining Area. Land and Resources Information, (08):

50-56.

Zhao YW, 2020. Finite-Difference Model of Land

Subsidence Caused by Cluster Loads in Zhengzhou,

China. Journal of Groundwater Science and

Engineering, 8(01): 43-56.

Liu M, 2021. Comprehensive Evaluation on the

Ecological Function of Groundwater in the Shiyang

River Watershed. Journal of Groundwater Science and

Engineering, 9(04): 326-340.

LI WY, 2019. Numerical Simulation and Land Subsidence

Control for Deep Foundation Pit Dewatering of

Longyang Road Station on Shanghai Metro Line 18.

Journal of Groundwater Science and Engineering,

7(2): 133-144.

Zhou NQ, 2019. Characteristics of the Main Inorganic

Nitrogen Accumulation in Surface Water and

Groundwater of Wetland Succession Zones. Journal of

Groundwater Science and Engineering, 7(2): 173-181.

Zhang Y, 2022. Selection of Pioneer Plants for Repairing

Limestone High and Steep Slopes in North China. The

Chinese Journal of Geological Hazard and Control,

33(05): 109-118.

Li B, 2021. Preliminary Investigation on the Soil

Environment of a Farmland Polluted by Tailings.

Modern Mining, 37(12): 31-34.

Dang XY, 2021. The Relationship between Groundwater

and Natural Vegetation in QaidamBasin. Journal of

Groundwater Science and Engineering, 9(04):

341-349.

Dang YX, 2022. Discussion on the Top-level Design and

Optimization of the System of Cultivated Land

Requisition-Compensation Balance. Natural Resource

Economics of China, 35(06): 43-48,88.

Cheng CS, 2021. Study on the Cultivated Land Quality

Grade Evaluation of Comprehensive Management of

Substandard Forest Land——A Case Study of the

Land Development Project of 5 Villages. Land and

Resources Information, (12): 18-22.

Yu SK, 2022. Research on Comprehensive Zoning of

Cultivated Land in Low Mountainsand Hills——A

Case Study of Dexing City. Natural Resource

Economics of China, 35(03): 30-37,44.

Niu Y, 2021. Spatial-Temporal Evolution Pattern of Land

Use Transition and Changesin Ecosystem Service

Value in Huaihai Economic Zone. Land and

Resources Information, (04): 37-45.

Shima Nasiri, 2022. Determination of Water Balance

Equation Components in Irrigated Agricultural

Watersheds Using SWAT and MODFLOW models:

A case study of Samalqan plain in Iran. Journal of

Groundwater Science and Engineering, 10(01): 44-56.

Liu QS, 2021. Temporal and Spatial Changes of

Landscape Pattern And Analysis of Ecosystem Service

Value in Rocky Desertification Comprehensive

Control Area. Land and Resources Informatization,

(04): 53-59.

Xu J, 2021. Impacts of Land Use Change on Value of

Ecosystem Services in the Zuoyoujiang River Basin of

Guangxi. Land and Resources Information, (06): 8-17.

Wei P, 2022. Ecological Restoration Model and Existing

Problems Analysis of Legacy Abandoned Mine in the

Trunk Stream and Tributaries of the Yangtze River: a

Case Study of Sichuan Province. Metal Mine, (09):

209-215.

Deng XB, 2021. Discussion on the Realization Path of

Cultivated Land Protection in County level Territorial

Space Planning——A Case Study of Guizhou

Province. Land and Resources Information, (04):

46-50.

Wei C, 2021. Research on Spatio-Temporal Variation

Rules of Land Use Based on Association Rules

Method——A Case Study of Guangxi Zhuang

Autonomous Region. Land and Resources

Informatization, (01): 30-37.

Yuan SH, 2021. Study on Multifunctional Evaluation of

Cultivated Land in Puyang China. Land and Resources

Information, (02): 30-38.

Design of Ecological Environmental Protection Incentive Model: Based on Game Theory and from the Perspective of Collusion

129