Government-commissioned industrial wastewater governance: A tripartite evolutionary game of local governments, third-party pollution control enterprises, and non-state-owned polluting enterprises.

Abstract

In China's government-commissioned industrial-park and public industrial-wastewater projects, local government (LG) purchases third-party pollution control enterprises (TPPCEs), while non-state-owned polluting enterprises (NSOPEs) provide operational cooperation. However, treatment providers may reduce effort after receiving payment, and NSOPEs may refuse cooperation when participation costs exceed expected benefits. To examine these interconnected problems, this study develops a tripartite evolutionary game involving LG, TPPCEs, and NSOPEs. The model distinguishes fixed contract payments from performance-based rewards and breach penalties and incorporates cost sharing when NSOPEs refuse cooperation while compliant treatment continues. Local stability analysis and numerical simulations across five scenarios reveal three findings. First, unconditional fixed payments do not change TPPCEs' relative incentives to comply, whereas performance rewards and breach penalties strengthen compliance incentives under LG's active governance. Second, TPPCEs' compliance and NSOPEs' participation depend on distinct payoff thresholds. Third, breach penalties and cost sharing complement each other when both compliance and participation incentives are insufficient. Together, they can support stable joint governance when LG monitoring incentives are also adequate. These findings clarify how contractual incentives and participation conditions jointly determine cooperation and provide a basis for targeting the specific constraints preventing stable wastewater governance.