TITLE:
Reward and Punishment Mechanism in a Vertical Safety Regulation System: A Transferred Prisoner’s Dilemma
AUTHORS:
Jiachen Li, Lihong Yu
KEYWORDS:
Safety Regulation, Failure of Regulation, Mechanism of Rewards and Punishments
JOURNAL NAME:
Modern Economy,
Vol.6 No.5,
May
20,
2015
ABSTRACT: Under the current
system of safety regulation in China, a lower level in the hierarchical system
means more regulatory failure. The mechanism of rewards and punishments has
been proven to compensate for regulatory failures according to game theory
separately. This study analyzed rewards and punishments simultaneously to
strengthen the regulatory power and offset the failure of regulation; examples are
provided to facilitate a comparison of the failure possibilities for various
degrees of rewards and punishments. In addition, this paper describes the
transformation of the behavior of coal enterprises, miners and local
governments. Doubling the rewards and punishments was determined to reduce the
possibility of failure of local government regulation by 27%; in addition, the
probability of safe production in coal mining enterprises increased by 87%, and
the willingness of miners to disclose information increased by 50%.