Who Will Pay for the “Mine Toxic Land”?—A Dynamic Game and Simulation Study of Negative Externality Governance in Rare Earth Mines Based on Prospect Theory

ABSTRACT The contradiction between economic development and the negative externalities generated by the extraction of ionic rare earth elements, such as resource depletion and environmental pollution, is becoming increasingly prominent. Based on prospect theory, this paper utilizes the perceived value of game players to construct a perceived benefit matrix that differs from the traditional benefit matrix and a tripartite game model. On the basis of the game analysis of the evolution of static reward and punishment mechanisms, three dynamic mechanisms, namely, dynamic reward, dynamic punishment, and dynamic reward and punishment, are successively introduced for analysis. The study demonstrated that under the static reward and punishment mechanism, the three‐party evolutionary game is not asymptotically stable. After the introduction of the dynamic mechanism, the evolutionary game becomes asymptotically stable, and all players in the tripartite game show a positive willingness to govern. Furthermore, varying value sensitivity coefficients result in a relatively stable perceived value of governance behaviors in rare earth mine development enterprises. With different value sensitivity coefficients, the perceived value of governance behaviors by rare earth product development enterprises remains relatively stable, while the perceived value of governance behaviors by the government and rare earth product application enterprises is more variable.