Bargaining between firms and environmental protection bureaus Water pollution in China

Purpose - The purpose of this paper is to identify the factors that affect China's water pollution in the prospective of environmental enforcement using a bargaining approach. Design/methodology/approach - A bargaining model that determines the level of discharge standard and over-discharge fee is constructed. Comparative static analysis is conducted. Findings - Comparative static analysis shows that enlarging the economic incentive of firm managers can aggravate water pollution. Moreover, increasing firm managers' bargaining power or reserve utility has the same negative effect. On the other hand, however, restricting the financial supports for environmental protection bureaus or increasing firm manager's fixed income can alleviate the water pollution. Originality/value - This is the first research that applies bargaining approach to studying the determination of over-discharge fees and the standard of discharge level.