*4.2. Energy-Saving Service Enterprises*

At present, the energy-saving renovation market for the existing residential buildings in China takes contract energy management as its main operation mode. The energy-saving service enterprises provide a package of professional energy-saving technical services, including energy-saving condition diagnosis, energy-saving project design, financing, renovation (construction, equipment installation and commissioning) and operation management, etc., for the energy-saving renovation of existing residential buildings. These enterprises are the main suppliers of energy-saving service products and they act as an internal driving force for the development of the energy-saving renovation market of existing residential buildings in China. The energy-saving service enterprises, as practitioners of the energy-saving renovation of existing rural residential buildings, have advanced energy-saving renovation technologies and resources. By signing renovation contracts with the government or rural residents and adhering to the government's incentive policies, they can obtain corresponding benefits according to contract stipulations or by reducing energysaving renovation costs. In addition, energy-saving service enterprises have relatively complete information on the energy-saving renovation market of existing rural residential buildings, which may lead to more speculation in the process of energy-saving renovation, thus undermining the benign cooperation among energy-saving service enterprises, the government and rural residents. Therefore, the main purpose of energy-saving service enterprises participating in energy-saving renovations of existing rural residential buildings is to standardize their own behaviors and maximize their own interests while weighing the advantages and disadvantages.

### *4.3. Rural Residents*

As users and direct beneficiaries of energy-saving renovations of existing rural residential buildings, residents' willingness to renovate and awareness of energy conservation and environmental protection will affect the development of the energy-saving renovation market and the improvements in the social environment. However, on August 1, 2008, the State Council of the People's Republic of China issued Regulations on Energy Conservation of Civil Buildings, which clearly stipulated that the cost of energy conservation renovations to existing buildings shall be borne jointly by the government and the building owner, and suggested that residents pay from 15 to 20 percent of the renovation cost. Therefore, as individuals, rural residents need to bear part of the cost of energy-saving renovation and accept the impact of the energy-saving renovation process on their normal work and life. Accordingly, residents in existing rural residential buildings are more concerned with their own financial status and the utility brought about by energy-saving transformations than with the maximization of social utility.

#### **5. Game Model Construction**

*5.1. Basic Assumptions of the Model*

**Assumption 1.** *The government, energy-saving service enterprises and rural residents are all bounded and rational*.

**Assumption 2.** *All participants have two different selection strategies: government behavior strategy set S1 = [regulatory incentives, laissez-faire]; service enterprise behavior strategy set S2 = [providing energy-saving services, not providing energy-saving services]; rural residents' behavior strategy set S3 = [fulfill energy-saving transform ation, refuse energy-saving transformation].*

**Assumption 3.** *Based on the assumption of bounded rationality, the probability that the government will supervise and encourage the energy-saving renovation of existing rural residential buildings is x, and the probability of laissez-faire is 1* − *x; the probability of the energy-saving service enterprises choosing to provide energy-saving services is y, and the probability of them choosing not to provide energy-saving services is 1* − *y; the probability of residents performing energy-saving renovations is z, and the probability of them refusing energy-saving renovations is 1* − *z, in which x, y and z* Є *[0,1].*

On the basis of on-the-spot investigation and the literature review, comprehensive analyses of the parameter settings of the cost, benefit and loss variables that affect the government, energy-saving service enterprises and rural residents' decisions are shown in Table 1.


**Table 1.** Symbols and meanings of parameters.

#### *5.2. Construction of Evolutionary Game Revenue Matrix*

According to the above-mentioned capital construction conditions and profit and loss parameters, a tripartite game model of the government, energy-saving service enterprises and rural residents is constructed, and an evolutionary game income matrix is obtained, as shown in Table 2.

**Table 2.** Evolutionary game income matrix.

