Modeling Subsidy Strategies for the China‐Europe Railway Express Based on Evolutionary Game Theory

Abstract

Government subsidies have been instrumental in fostering the development of the China‐Europe Railway Express (CERE), yet the continued implementation without thought has led to significant market distortions and inefficiency, raising a critical policy dilemma: whether to maintain, reduce, or phase out subsidies. To address this question, this paper employs an evolutionary game model to examine the strategic interactions between local governments and railway companies. We analyze their evolutionarily stable strategies (ESS) and evaluate the cumulative utility of local governments under varying subsidy schemes. The key findings indicate: (1) railway companies consistently prefer high‐frequency shift (HFS) operations, irrespective of subsidy schemes; (2) the ESS for the local governments is highly sensitive to human resource costs and opportunity cost; (3) the initial probabilities of HFS and subsidy strategies affect the convergence speed towards ESS but do not alter the final ESS; and (4) the optimal subsidy scheme can maximize local governments’ cumulative utility. By integrating these findings into a multiperiod cumulative‐utility framework, the study provides a basis for determining strategic subsidy levels that improve governmental welfare while reducing long‐term subsidy dependence. These results offer actionable guidance for designing more targeted, transition‐sensitive, and fiscally sustainable CERE subsidy policies.