Abstract
This chapter attempts to formulate a dynamic game-theoretic framework to analyze how gains or payoffs from transnational cooperation can be shared among the nations so that cooperation can be sustained. The scope of our study lies within the area of dynamic cooperative game, and subgame consistency is the key to sustainable cooperation among the nations. This chapter views the Belt and Road Initiative (BRI) as a dynamic cooperative game with multiple nations. Optimal solutions are formulated for the distribution of gains. Since the BRI is “nonexclusive” and “nonrestrictive”, nations will opt to participate in the initiative and stay on only if the gains (payoffs) are justified. We therefore propose a bi-level redistribution scheme and the required institutional design mechanisms to facilitate transnational redistribution. Our proposals ensure that the BRI will generate optimal outcomes for all the nations at all points in time under the conditions of individual rationality, group optimality and subgame consistency.
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Notes
- 1.
The former was unveiled by China’s President Xi Jinping at Nazarbayev University on September 7, 2013, during his state visit to Kazakhstan. The latter was announced before the Indonesian Parliament on October 3, 2013, during his state visit to Indonesia.
- 2.
Full text can be retrieved from http://english.court.gov.cn/2015-10/08/content_22130532.htm
- 3.
- 4.
Ibid.
- 5.
Wang Hu Ning (王沪宁) was the Director of the Central Policy Research Office and Director of the Central Reform Office. Wang Yang (汪洋) had oversight of foreign trade and economic affairs. Yang Jing (杨晶) was a member of the State Council and Secretary General of the State Council. Yang Jie Chi (杨洁篪) was a member of the State Council and had oversight of foreign affairs.
- 6.
See CNBC, “US may soon claim up to $1.7 billion penalty from China’s ZTE,” June 4, 2018, and Reuters, “Exclusive: China’s ZTE signed preliminary agreement to lift U.S. ban,” June 6, 2018.
- 7.
See GBTimes, “China signs Belt and Road deals with 69 countries and organizations,” August 18, 2017. Retrieved from https://gbtimes.com/china-signs-belt-and-road-deals-69-countries-and-organisations
- 8.
Ports are important to trade and development if we notice that around 90% of world trade is conducted by sea and 80% of the world’s total manufacturing output is produced within 100 km. from the coastlines. For port development projects, see Zheng et al. (2017).
- 9.
Full text can be retrieved from http://en.ndrc.gov.cn/newsrelease/201612/P020161207645765233498.pdf
- 10.
“Vision and Actions on Jointly Building Silk Road Economic Belt and Twenty-First-Century Maritime Silk Road” issued by the National Development and Reform Commission, Ministry of Foreign Affairs, and Ministry of Commerce of the People’s Republic of China, with State Council Authorization, March 2015.
- 11.
“Decision of the CCCPC on Some Major Issues Concerning Comprehensively Deepening the Reform,” retrieved from http://english.court.gov.cn/2015-10/08/content_22130532.htm
- 12.
See also Ministry of Finance, PRC, “Guiding Principles on Financing the Development of the Belt and Road,” retrieved from https://eng.yidaiyilu.gov.cn/zchj/qwfb/13757.htm
- 13.
Full text of the speech can be retrieved http://www.xinhuanet.com/english/2015-03/29/c_134106145.htm
- 14.
The Human Development Index (HDI) is a composite index developed by Pakistani economist Mahbub ul Haq for the United Nations Development Programme (UNDP). It incorporates per capita income, education, and life expectancy indicators. It is used to rank countries into four tiers of human development. The score of a country is positively related to the value of the individual indicators.
- 15.
A different approach is to classify countries based on their stage of industrialization. See Wang Lei and Wang Li Qiang (ed.), The Belt and Road: Towards Win-Win Cooperation (in Chinese), Social Sciences Academic Press (China), May 2017, Chapter 3.
- 16.
Currently submarine cables in the world mainly concentrate in the trans-Atlantic region. The digital linkage of a great majority of the developing countries is depended on the advanced countries. In the digital world, data and information exchanges have in fact created more value than the physical movement of goods. It is therefore vital that digital connectivity can be built as part of the BRI in order to enhance global competitiveness. See McKinsey & Company, “Digital Globalization: The New Era of Global Flows,” McKinsey Global Institute, March 2016; see https://www.the-digital-insurer.com/wp-content/uploads/2016/06/709-mgi_digital_globalization.Pdf
- 17.
See Leonid Hurwicz (1960).
- 18.
See Leonid Hurwicz (1972).
- 19.
See Eric Maskin and Tomas Sjöström (2002).
- 20.
Prize Committee of the Royal Swedish Academy of Sciences (2007).
- 21.
For a detailed treatment of the topic, see William N. Gianaris (1990).
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Yeung, D.W.K., Lui, A.W.C. (2019). China’s Belt-Road Initiative: The Political Economy of Coordinated Coalitional Cooperation. In: Yu, FL.T., Kwan, D.S. (eds) Contemporary Issues in International Political Economy. Palgrave Macmillan, Singapore. https://doi.org/10.1007/978-981-13-6462-4_9
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