Moral Hazard Analysis of Third Party Sewage Treatment

Abstract

This paper uses the theoretical model of moral hazard and "tragedy of the Commons" and relevant analysis methods to analyze the discharge of production sewage into rivers by n production sewage enterprises, and the third-party treatment enterprises to treat the discharge of production sewage enterprises, and obtains the Nash equilibrium sewage discharge of each production sewage enterprise to maximize its own payment and the maximum social benefit. In the case of information asymmetry between two kinds of enterprises and between two kinds of enterprises and the government, there is moral hazard, and enterprises will harm social benefits for their own interests, which is not Pareto optimal. It concludes that it is necessary for the government to strengthen regulation, and puts forward relevant suggestions such as government regulation and corresponding incentive measures to improve information asymmetry, restrain the moral hazard of production and pollutant discharge enterprises and third-party enterprises, effectively control river pollution, protect water resources, and achieve sustainable development.