An Evolutionary Game Analysis of Heterogeneous Local Government Land Supply Behavior and Industrial Transfer Competition

Abstract

The implicit assumption of homogeneity in traditional economics fails to adequately explain the complex and contradictory behavior exhibited by different local governments in China during the land supply process. The issue of land supply is characterized by practical chaos and has fallen into a theoretical research dilemma. Starting from two dimensions of heterogeneity—preferences and income—this study establishes an evolutionary game model of the limited rationality of local governments. It explores the behavioral evolution process of local governments in the context of industrial competition for land supply and its convergence trends. The research findings indicate that the land supply behavior of local governments is primarily determined by the degree of heterogeneity in preferences and income, as well as the level of compensation for losses to cooperative partners and the severity of penalties for non-cooperative behavior. If local governments’ preferences converge towards a certain threshold or if their income continually increases, they are more inclined towards cooperative behavior; otherwise, they tend to act non-cooperatively. If local governments’ revenues are heavily reliant on industrial transfers, they are more likely to engage in non-cooperative land supply behavior. This research offers theoretical insights and policy recommendations to enhance the optimal allocation of land resources in China.