The Conditionality of Wetland Ecological Compensation: Supervision Analysis Based on Game Theory

Abstract

Wetland ecological compensation (WEC) is the key to the conflict between wetland conservation and economic development. While “conditionality” is critical to the efficiency and equity of WEC projects, supervision guarantees the conditionality and effects of WEC policies. Based on field research around the Poyang Lake, this paper applies game theory to systematically analyze WEC supervision and leverages the model of dynamic game with incomplete information to discuss the effects of weak supervision on rural households’ future behaviors. The results show that (1) weak supervision greatly dampens the effects of WEC projects; (2) the key underlying causes of weak supervision include low compensation rates, low default costs, and low probability of actual supervision, and the respective relevance of the three causes is not parallel but decreasing; (3) further analysis based on the model of dynamic game with incomplete information demonstrated that weak supervision affects rural households’ current and future behaviors. The paper concludes that, in order to address the roots of weak WEC supervision, appropriate compensation rates should be developed; default costs should be increased; and the actual supervision probability of authorities should be raised. The paper provides detailed explanations of real-life problems and fills the gap in the existing research by defining “weak regulation”, exploring its root causes, and comprehensively analyzing and forecasting its impacts.