Collusion or Cooperation — How Public Supervision Affect the Business Government Interaction in Cleaner Production Regulation

Abstract

Most developing countries face the dilemma of industrial development and environmental degradation. Cleaner production and effective government regulation have become key to environmental protection. However, the effectiveness of government regulation is challenged due to information asymmetry, etc., and with the development of digital economy, public supervision plays an increasingly important role. This paper constructed a tripartite evolutionary game model of local regulators, enterprises and the public. By analyzing the equilibrium points, it identified the key factors and influencing mechanisms among stakeholders in cleaner production regulation. The results show that public supervision primarily operates through the administrative intervention mechanism based on the penalty system and the reputation deterrent mechanism based on market constraints to incentivize a shift from ‘collusion’ to ‘cooperation’ among government and enterprises in the regulation process. Informal mechanisms such as ‘hush money’ and ‘reporting rewards’, which are common in reality, can have a crucial influence on the behavioral strategies of local regulators and firms.

Keywords: cleaner production, business-government interaction, public supervision, collusion, cooperation