Strategic interaction between institutional investors and supervision department: a theoretical analysis of low-price collusion in SBIC

Abstract We introduce evolutionary game method to analyze low-price collusion in inquiry market of Sci-Tech Innovation Board China (SIBC) from the perspective strategic interaction between large institutional investors (LIIs), small and medium-sized (SMIIs), supervision department (SD). The results show that behaviors SD, quotation investors, are subject conditions. Under condition benefits tough lower a lot than minimum light (light condition), SD will choose turn illegal response. Finally, steady-state equilibrium with form SIBC’s even penalty for quotation. On contrary, under higher maximum (tough condition) quotation, legal Further numerical simulations that: (1) High-price culling rule become booster accelerate SMIIs’ process imitative (2) Blindly increasing penalties or reducing rate is not an appropriate approach solve problem since it cannot shift into make supervise toughly. (3) Institutional investors’ choices strategies more volatile highly susceptible when facing exogenous uncertainty. Therefore, keys solving shifting through incremental supervision, providing stable predictable policy. In conclusion, creation fair doesn’t only depend on restraint punishment but also requires establishment mechanism those compatible market-based inquiry.