Abstract:Based on prospect theory, enterprise's low-carbon production strategies was analyzed under the supervision of local government. Perceived payoff matrix of enterprise and local government has been established. Evolution game model of low-carbon strategies between enterprise and local government has been built by replicator dynamics equations. Numerical simulation has been taken to analyze the costs of environmental degradation risk, cost of punishment, government subsidies and interests' effect on evolutionary results. The results show that: Low-carbon strategies of businesses and local governments depended on the choice of another and parameter perceived value. When parameters fluctuate around the perception threshold, low-carbon strategies change with the value; Under a certain conditions, low-carbon strategies evolved to the set that enterprises choose low-carbon production and local governments choose Supervision, which can maximize the environmental benefits. The enterprise and local governments' profit and loss perceived value influenced profit maximization; The probability of enterprises low-carbon production and local governments supervision affect the speed of convergence.