Competition and collusion between government and businesses in pollution management: analysis based on stochastic differential game

This paper studies the pollution reduction decision process of local government under the influence of social media and PES mechanism using stochastic differential game theory. We built two differential game scenarios simulating the decisions making process between upstream area local government and business. One is Stackleberg game assuming that the business’s emission abatement is closely supervised by local government, and the other is cooperative game which is applied when business and local government collude in emission abatement. Comparing simulation results reveals two main findings. One is that transparency make local government perform better in pollution abatement. The other one is that local government tends to collude with business if there is a lack of transparency and supervision. Based on these findings, policy suggestions are presented to overcome this problem. Part of the Public Administration and Information Technology book series (PAIT,volume 25