Study on Management and Compensation Mechanism of Transboundary Water Pollution Based on Game Theory

River pollution in China is strikingly represented by transboundary water pollution. The article analyzes the issue of transboundary water pollution based on game theory angle, constructs a non-cooperative model of target quota reduction method and proposes league game model allowing transferring pollutant and reduction of cooperative management. In order to guarantee the stability of league game, Nash method is adopted as fair profit allocation in cooperative regions and paid compensation obtained by different cooperative alliance is further determined. In this way, economic superiority in different areas can be developed and the overall gains of the valley can reach to the maximum. The conclusion is of great significance for avoiding the old way of river pollution control in China as well as pushing cycling economy development.