Assessing the Role of Reward and Punishment Mechanism in House Price Regulation in China: A Game-Theoretic Approach

Abstract

In recent years, the Chinese government has introduced relevant real estate policies to control the rapid rise of house prices, but with little effect. The success of regulation largely depends on the active participation of real estate developers. However, how to encourage developers to actively participate in regulation is under-explored. To fill this gap, we use the Nash game to explore the reasons for the failure of house price regulation, and then design a reward–punishment mechanism to urge real estate developers to actively implement regulatory policies. Our analysis shows that the passive participation of real estate developers leads to the failure of regulation. The established reward and punishment mechanism, if a considerable amount of reward and punishment is formulated, can effectively prompt developers to actively implement policies. These findings are of great value to promote the healthy development of the real estate market.