The Role Of Urban Government In Chinese Institutional Change

In Chinese studies on Neo-institutional Economics, the process of institutional change has always been studied by Economists. One consensus they drew is that the role of urban government must be highlighted in order to comprehensively understand Chinese institutional change. However, all of these studies were conducted according to the framework of "Demand-Supply", which is derived from Marcher's "Partial Equilibrium" theory. This theory has been criticized thoroughly because of the imbedded weakness. Therefore, this paper attempts to analyze Chinese institutional change from the Game Theory perspective. At the beginning of this paper, we build a complete information game model, with central government, urban government and micro-unit as the participants. After that we utilize this model to analyze institutional change in China's transitional period. In the end, we use the case of water rights transfer between Dongyang and Yiwu in order to verify the conclusions drawn from this game model.