What game theory tells us about China-Taiwan face-off

Source: The post is based on the article “What game theory tells us about China-Taiwan face-off” published in the Live Mint on 9^th August 2022.

Syllabus: GS 2 International Relations

Relevance: India’s Indo-Pacific Strategy; and Global Geopolitics and Geopolitics in the Indo-Pacific Region;

News: Recently, Chinese forces have encircled Taiwan by sea. They have blocked all global supplies to Taiwan by cutting off the entry of sea cargo.

History of China-Taiwan Conflict

China-Taiwan tension has long been in existence, right from the mid-20th century. It is an indirect game being played between China and the US (as the chief backer of Taiwan’s self-rule).

China wants to integrate Taiwan’s governance with its own. It prefers a peaceful reunification, but without giving up the use of force as an option to achieve that goal.

The Game Theory in International Relations

Game Theory is an important model which helps analyze the strategic interactions in international relations.

The basic elements of this Game:

(1) There are some decision-makers who interact, called ‘players’. For example, in the context of the China-Taiwan crisis, these are the heads of both adversaries.

(2) Players have a range of possible actions that they could take to secure benefit, and such actions are called ‘strategies’. For example, Chinese and Taiwanese head have their own strategies.

(3) Once both sides of the game choose theirs, an outcome is realized wherein both receive ‘payoffs’, which may be thought of as the utility of their specific actions.

(4) The decisions depend on the visible actions of others. Further, the decision-makers also pay attention to alternate scenarios of potential action taken by others.

(5) There may be a ‘dominant strategy’ or ‘Nash equilibrium’ in the game. It refers to an action that is better no matter what the other country does, and a pair of opposing strategies are said to be at a Nash equilibrium.

Thus, the scenario in question could be depicted as a ‘two-player, or two-strategy’ game.

However, strategies and decisions taken in the game are not based on a perfect information scenario. There is a lack of information on what others may do results in asymmetry.

The ongoing China-Taiwan tension is one such scenario that could be analyzed from a Game Theory perspective.

The policymakers of China, as well as Taiwan, have little information in the form of knowledge about each other’s strategic choices.

The Game Theory helps identify the possible best situations in the China-Taiwan confrontation. However, there are multiple ‘best’ situations and the theory doesn’t tell us which one would occur.

First consider a scenario in which there is a ‘two-player, or two strategy game (China and Taiwan).

(1) If China and Taiwan go to war, both combatants would lose weapons, soldiers, and peace. However, the net payoff or advantage, in this case, might be far better for China

(2) Taiwan is a small country and has much tighter limitations on the weaponry and soldiers it can deploy. Therefore, Taiwan might not respond to Chinese provocations and submit to Beijing. Then it is advantageous for China. This explains why Beijing is showcasing its military strength by firing missiles and using other armed maneuvers to intimidate Taipei. China is expecting to obtain Taiwan’s submission this way.

(3) If both countries choose the option of not going to war. This is the best solution for both. Both will sign a sort of bilateral agreement wherein Taiwan would have to adhere to a set of conditions. Although not mutually acceptable to them, it would lead to a suboptimal solution.

In the case of China and Taiwan, there would not be any ‘dominant strategy’ or ‘Nash equilibrium’. Because both countries would try to adopt optimal strategies, keeping each other in consideration.

Second, alternative scenarios when the US also enters into the game as the third player.  Here, the USA strategy cannot be predicted and so a clear payoff for it cannot easily be worked out.

In case the US also enters into the game, there may be a dominant strategy or Nash equilibrium in the game.

The China-Taiwan standoff has the possibility of solutions that could be worked out through peace deliberations, but for this to happen, the US should not enter into the game.