An evolutionary game theory between finance innovation and financial regulation

This study constructs an evolutionary game model between financial regulators and Internet financial institutions and discusses the strategy choices of the two participants under different circumstances. When analyzing the stable equilibrium strategy, the results show that when there are stable points in the game, Internet financial institutions tend to 'excessive innovation', while regulators' strategies are affected by costs and benefits. When there is no stable point in the game, financial regulators and Internet financial institutions are in a continuous game of 'moderate innovation – maintenance regulation – excessive innovation – strengthen regulation – moderate innovation.' The study also provides policy recommendations to balance Internet financial innovation and regulation.