Chinese Apps ban — Possible response from China on trade with India, A Game theory perspective

A Point of view on China’s current response to app ban. Changing the objectives and assumptions may also lead to a different equilibrium. This model can be used for simulating China’s potential moves & strategizing appropriate response.

Assumptions:

  1. India has 2 strategies — 1) Continue to trade with China or 2) “Do it yourself” in lines with self-reliance (Atamanirbhar) strategy
Outcome Matrix

The ”Outcome Matrix” corresponding will be as in Figure 1

For Game matrix:

  1. Assume India’s main objective is towards self-reliance and China’s is to trade more with India.
Game Matrix

Now, from the game matrix we can conclude that for China irrespective of India’s strategy the dominant strategy is to Continue to Trade with India and for India the Dominant Strategy is to follow Do it Yourself — the self reliant strategy irrespective of China’s strategy. Hence the equilibrium is “Do it yourself” and “Continue trade with India” as each player in this game strives to obtain highest score.

This simplistic model, explains why China is only engaged in vocal displeasure than with any retaliatory trade restrictions, in response to the app ban.

Inspiration Guner, S. (2012). A Short Note on the Use of Game Theory

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