Evolutionary game analysis of formal finance and private finance

This paper uses evolutionary game theory to analyze cooperation and competition mechanisms of private finance and formal finance. The results show that the evolutionary direction of the financial system is related with payoff matrix of game, and subject to the initial state of the system. In addition, the co-generated excess profits, the initial cost of investment cooperation, as well as its discount factor are the important parameters affecting cooperation and competition between private finance and formal finance. Private finance and formal finance need establish and maintain a healthy partnership, which should comply with the principle of maximum interest of cooperation, and establish good working environment from long-term perspective, then to achieve "win-win" state.