Game Analysis and Simulation of the River Basin Sustainable Development Strategy Integrating Water Emission Trading

Water emission trading (WET) is promising in sustainable development strategy. However, low participation impedes its development. We develop an evolutionary game model of two enterprise populations’ dynamics and stability in the decision-making behavior process. Due to the different perceived value of certain permits, enterprises choose <b><i>H</i></b> strategy (bidding for permit) or <b><i>D</i></b> strategy (not bidding). External factors are simplified according to three categories: <b><i>r</i></b><b><i>_H</i></b>-bidding related cost, <b><i>G</i></b>-price and <b><i>F</i></b>-penalty. Participation increase equals reaching point (<b><i>H,H</i></b>) in the model and is treated as an evolutionarily stable strategy (ESS). We build a system dynamics model on AnyLogic 7.1.1 to simulate the aforementioned game and draw four conclusions: (1) to reach ESS more quickly, we need to minimize the bidding related cost <b><i>r</i></b><b><i>_H</i></b> and price <b><i>G</i></b>, but regulate the heavy penalty <b><i>F</i></b>; (2) an ESS can be significantly transformed, such as from (<b><i>D,D</i></b>) to (<b><i>H,H</i></b>) by regulating <b><i>r</i></b><b><i>_H</i></b>, <b><i>G</i></b> and <b><i>F</i></b> accordingly; (3) the initial choice of strategy is essential to the final result; (4) if participation seems stable but unsatisfying, it is important to check whether it is a saddle point and adjust external factors accordingly. The findings benefit both water management practice and further research.