A tripartite evolutionary game study on the biodiversity financial market based on prospect theory

Abstract Based on prospect theory, this paper constructs a tripartite evolutionary game model of financial institutions, enterprises with high ecological impact, and the government, which focuses on the trade-off of interests in the strategic choice of companies with high ecological impact and the key impact on their participation in the biodiversity financial market. The results show that enterprises with high ecological impact can obtain long-term benefits such as green premium, policy subsidy, and reputation improvement by providing biodiversity-friendly projects, but they must bear transformation costs and operational risks. On the contrary, although maintaining the traditional production mode can avoid short-term transformation investment, it faces potential losses such as regulatory penalties, financing constraints, and market share loss. Under perfect rationality, firms with high ecological impact voluntarily supply biodiversity-friendly projects, and the biodiversity financial market thus reaches a steady state. However, after introducing the probability distortion cognitive bias that is closer to reality, firms tend to overestimate the transition risk and underestimate the long-term benefits, which leads to a conservative strategy and a pessimistic equilibrium without cooperation. Through Monte Carlo simulation of the market, it is shown that only when the economic incentive exceeds the set threshold will the firm switch to cooperation; Long-term stability still depends on the behavioral correction of the decision-making agent to his risk perception pattern. Therefore, to promote the healthy development of the biodiversity financial market, it is necessary to resolve the transformation concerns of enterprises with high ecological impact through precise policy design, and guide their strategic choices to lean towards sustainable supply, to realize the systematic transformation of the biodiversity financial market from cognitive block to synergistic symbiosis.