Research On Enterprises Strategic Behavior Of Oligopolistic Thermal Power Firms Under Environmental Regulation

Since the reform and opening, China’s economic have developed rapidly, whichcreated the ‘China miracle’, but also paid heavy environmental costs. On the terms ofeconomics, environmental pollution is a typical case of negative externality, which needfor government to regulate. However, due to asymmetric information, when thegovernment conducting environmental regulation, the oligopolistic firms in imperfectlycompetitive markets would ‘regulatory capture’ the regulation. It will impact theeffectiveness of government environmental regulation. At the same time, the environmentregulation is always incomplete, when the degree of regulation changed, the effect ofenvironmental regulation will also be affected. This paper research on the oligopolisticfirms’ strategic behavior, which under the environmental regulation. Research theirstrategic behavior in the condition of the regulator use the different environmentalregulation tools, and the different degree of regulation. Discussed and compared the impactof environmental regulation due to different strategic behavior and provide appropriaterecommendations for government environmental regulation.Through the review of domestic and international research on environmentalregulation, the research has focused on the study of environmental regulation policy toolsand lack of research on strategy behavior in the environmental regulation. The study ofenvironmental regulation policy tools are mostly textual representation and lack ofmathematical modeling study. The study of business strategy behavior, is generallyhypothesis the environmental regulation is complete, lack of incomplete environmentalregulatory and imperfect competition market structure study, and lack of in this conditionhow to choice of environmental regulation policy tools study. Therefore, this paper hopesthat through the research of strategy behavior in asymmetric information and incompleteenvironmental regulation, imperfect competition market structure, make up for somedeficiencies left by the previous studies.This paper based on the model of Fowlie(2008)[1], combine the actual of China’sthermal power industry, theoretically extension the sewage leakage model, obtained theconclusion of using different regulatory policy tools, the effect of regulation is same. Butusing different degrees of regulation, the effect of regulation is varied. Complete regulationis not necessarily better than the incomplete regulation, incomplete regulation is notnecessarily better than non-regulation. Through data simulation this paper verified the conclusions. At last aim to the problems of environmental regulation of China’s thermalpower industry, Government should focus on market-based environmental regulationpolicy tools and find a reasonable degree of environmental regulation.