Reward and Punishment Mechanism in a Vertical Safety Regulation System: A Transferred Prisoner’s Dilemma
Affiliation(s)
School of Business, East China University of Science and Technology, Shanghai, China.
School of Business, East China University of Science and Technology, Shanghai, China.
ABSTRACT
Under the current system of safety regulation in China, a lower level in the hierarchical system means more regulatory failure. The mechanism of rewards and punishments has been proven to compensate for regulatory failures according to game theory separately. This study analyzed rewards and punishments simultaneously to strengthen the regulatory power and offset the failure of regulation; examples are provided to facilitate a comparison of the failure possibilities for various degrees of rewards and punishments. In addition, this paper describes the transformation of the behavior of coal enterprises, miners and local governments. Doubling the rewards and punishments was determined to reduce the possibility of failure of local government regulation by 27%; in addition, the probability of safe production in coal mining enterprises increased by 87%, and the willingness of miners to disclose information increased by 50%.
Under the current system of safety regulation in China, a lower level in the hierarchical system means more regulatory failure. The mechanism of rewards and punishments has been proven to compensate for regulatory failures according to game theory separately. This study analyzed rewards and punishments simultaneously to strengthen the regulatory power and offset the failure of regulation; examples are provided to facilitate a comparison of the failure possibilities for various degrees of rewards and punishments. In addition, this paper describes the transformation of the behavior of coal enterprises, miners and local governments. Doubling the rewards and punishments was determined to reduce the possibility of failure of local government regulation by 27%; in addition, the probability of safe production in coal mining enterprises increased by 87%, and the willingness of miners to disclose information increased by 50%.
Cite this paper
Li, J. and Yu, L. (2015) Reward and Punishment Mechanism in a Vertical Safety Regulation System: A Transferred Prisoner’s Dilemma. Modern Economy, 6, 552-562. doi: 10.4236/me.2015.65054.
Li, J. and Yu, L. (2015) Reward and Punishment Mechanism in a Vertical Safety Regulation System: A Transferred Prisoner’s Dilemma. Modern Economy, 6, 552-562. doi: 10.4236/me.2015.65054.
References
[1] Viscos, W.K. (1979) The Impact of Occupational Safety and Health Regulation. Bell Journal of Economics, 10, 117-140. http://dx.doi.org/10.2307/3003322 [2] Lewis-Beck, M.S. and Alford, J.R. (1980) Can Government Regulate Safety? The Coal Mine Example. American Political Science Review, 74, 745-756. http://dx.doi.org/10.2307/1958155 [3] Fishback, P.V. (1986) Workplace Safety during the Progressive Era: Fatal Accidents in Bituminous Coal Mining, 1912-1923. Explorations in Economic History, 23, 269-298. http://dx.doi.org/10.1016/0014-4983(86)90006-9 [4] Ruser, J. and Smith, R.S. (1988) The Effects of OSHA Records Check Inspections on Reported Occupational Injuries in Manufacturing Establishments. Journal of Risk and Uncertainty, 1, 415-435. http://dx.doi.org/10.1007/BF00117644 [5] Stigler, G. (1971) The Theory of Economic Regulation. Bell Journal of Economics, 2, 3-21. http://dx.doi.org/10.2307/3003160 [6] Petlzman, S. (1976) Towards a More General Theory of Regulation. 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Proceedings of National Academy of Science, 96, 10933-10938. http://dx.doi.org/10.1073/pnas.96.19.10933 [28] Charness, G., Frechette, T. and Qin, C.-Z. (2007) Endogenous Transfers in the Prisoner’s Dilemma Game: An Experimental Test of Cooperation and Coordination. Game and Economic Behavior, 60, 287-306. http://dx.doi.org/10.1016/j.geb.2006.10.010 [29] Qin, C.-Z. (2008) Inducing Cooperation by Self-Stipulated Penalties. Annals of Economics and Finance, 9, 385-395. [30] Andreoni, J., Harbaugh, W. and Vesterlund, L. (2003) The Carrot or the Stick: Rewards, Punishments, and Cooperation. American Economics Review, 93, 893-902. http://dx.doi.org/10.1257/000282803322157142
[1] Viscos, W.K. (1979) The Impact of Occupational Safety and Health Regulation. Bell Journal of Economics, 10, 117-140. http://dx.doi.org/10.2307/3003322 [2] Lewis-Beck, M.S. and Alford, J.R. (1980) Can Government Regulate Safety? The Coal Mine Example. American Political Science Review, 74, 745-756. http://dx.doi.org/10.2307/1958155 [3] Fishback, P.V. (1986) Workplace Safety during the Progressive Era: Fatal Accidents in Bituminous Coal Mining, 1912-1923. Explorations in Economic History, 23, 269-298. http://dx.doi.org/10.1016/0014-4983(86)90006-9 [4] Ruser, J. and Smith, R.S. (1988) The Effects of OSHA Records Check Inspections on Reported Occupational Injuries in Manufacturing Establishments. Journal of Risk and Uncertainty, 1, 415-435. http://dx.doi.org/10.1007/BF00117644 [5] Stigler, G. (1971) The Theory of Economic Regulation. Bell Journal of Economics, 2, 3-21. http://dx.doi.org/10.2307/3003160 [6] Petlzman, S. (1976) Towards a More General Theory of Regulation. Journal of Law and Economics, 2, 211-240. [7] Becker, G. (1983) A Theory of Competition among Pressure Groups for Political Influence. Quarterly Journal of Economics, 98, 371-400. http://dx.doi.org/10.2307/1886017 [8] Hagg, P.G. (1997) Theories on the Economics of Regulation: A Survey of the Literature from a European Perspective. European Journal of Law and Economics, 4, 337-370. http://dx.doi.org/10.1023/A:1008632529703 [9] Kniesner, T.J. and Leeth, J.D. (2004) Data Mining: MSHA Enforcement Efforts, Underground Coal Mine Safety, and New Health Policy Implications. Journal of Risk and Uncertainty, 29, 83-111. http://dx.doi.org/10.1023/B:RISK.0000038939.25355.d8 [10] Scholz, J.T. and Grey, W.B. (1990) OSHA Enforcement and Workplace Injuries: A Behavioral Approach to Risk Assessment. Journal of Risk and Uncertainty, 3, 283-305. http://dx.doi.org/10.1007/BF00116786 [11] Kniesner, T.J. and Leeth, J.D. (1995) Abolishing OSHA. Regulation, 4, 46-56. [12] Mungan, M.C. (2011) Welfare Enhancing Regulation Exemptions. International Review of Law and Economics, 31, 249-255. http://dx.doi.org/10.1016/j.irle.2011.06.002 [13] Calcott, P. (2004) Government Warnings and the Information Provided by Safety Regulation. International Review of Law and Economics, 24, 71-88. http://dx.doi.org/10.1016/j.irle.2004.03.005 [14] Viscusi, W.K., Vernon, J.M. and Harrington Jr., J.E. (2010) Economics of Regulation and Antitrust. 3rd Edition, China Machine Press, Beijing [15] Mainardi, S. (2005) Earnings and Work Accident Risk: A Panel Data Analysis on Mining. Resources Policy, 30, 156-167. http://dx.doi.org/10.1016/j.resourpol.2005.08.002 [16] Xiao, X.Z., Qi, Y.F. and Li, H.J. (2008) An Empirical Study on Effects of Coal Mine Safety Regulation in China. China Industrial Economics, 5, 67-76. (In Chinese) [17] Li, S.L. and Ye, X.D. (2010) The Empirical Study of Influences from Industry Centralization Degree to Production Security: Based on Recombination of Coal-Mining Enterprises in Shanxi Province. Vol. 1, Dongbei University of Finance and Economics, Dongbei, 31-34. (In Chinese) [18] Xiao, X.Z., Qi, Y.F. and Li, H.J. (2011) Asymmetric Effects of Safety Regulation Fluctuations on Coal Production: Empirical Analysis Based on Non-Linear STR Model. Economic Research Journal, 9, 96-107. (In Chinese) [19] Ding, M.X. (2011) Causation Analysis of Safety Accidents in Coal Industry. Mine Safety, 5, 187-189. (In Chinese) [20] Guo, C.X. (2007) Research on Coal Mine Enterprise Safety Production in China: From the Perspective of the Troop and Quality of the Labor Force. China Industrial Economics, 10, 103-110. (In Chinese) [21] Nie, H.H. and Jiang, M.J. (2011) Coal Mine Accidents and Collusion between Local Governments and Firms: Evidence from Provincial Level Panel Data in China. Economic Research Journal, 6, 146-156. (In Chinese) [22] Sun, Y.B. and Geng, Q.Q. (2009) The Study of Cubic Games about Security in Coal Production. Coal Economic Research, 3, 78-80. (In Chinese) [23] Xiao, X.Z. and Han, C. (2010) Asymmetric Information, Enterprises’ Safety Investment and Effect of Government Regulation—With the Discussion of Security Implications of Compulsory Insurance. China Industrial Economics, 7, 74-83. (In Chinese) [24] Chen, C.S. and Han, Q.H. (2010) Regulation of Coal Security, Information Disclosure and Social Welfare: Based on New Regulation Economics Structure. Finance and Economics Research, 2, 22-27. (In Chinese) [25] Schelling, T. (1960) The Strategy of Conflict. Harvard University Press, Cambridge, MA. [26] Varian, H. (1994) A Solution to the Problem of Externalities When Agents Are Well-Informed. American Economic Review, 84, 1278-1293. [27] Andreoni, J. and Varian, H. (1999) Preplay Contracting in the Prisons’ Dilemma. Proceedings of National Academy of Science, 96, 10933-10938. http://dx.doi.org/10.1073/pnas.96.19.10933 [28] Charness, G., Frechette, T. and Qin, C.-Z. (2007) Endogenous Transfers in the Prisoner’s Dilemma Game: An Experimental Test of Cooperation and Coordination. Game and Economic Behavior, 60, 287-306. http://dx.doi.org/10.1016/j.geb.2006.10.010 [29] Qin, C.-Z. (2008) Inducing Cooperation by Self-Stipulated Penalties. Annals of Economics and Finance, 9, 385-395. [30] Andreoni, J., Harbaugh, W. and Vesterlund, L. (2003) The Carrot or the Stick: Rewards, Punishments, and Cooperation. American Economics Review, 93, 893-902. http://dx.doi.org/10.1257/000282803322157142