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Can APEC Bridge the Divide? A Game Theory Approach to US-China Cooperation

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  • Phijaisanit, Euamporn

Abstract

The escalating US-China rivalry threatens to impede economic integration within the Asia-Pacific Economic Cooperation (APEC) forum. This paper departs from the existing literature by analyzing specific actions of both countries that exemplify a focus on short-term gains. It argues that by understanding the dominance of short-run gains in current US-China actions, a framework that emphasizes long-term cooperation becomes particularly relevant. Employing game theory, the paper examines APEC's future prospects. The paper analyzes potential cooperation and conflict scenarios based on economic incentives and strategic considerations. While the current rivalry resembles a Prisoner's Dilemma, the paper explores alternative game structures, namely; Repeated Games and Supergames, that can incentivize cooperation on shared economic objectives. The analysis demonstrates that long-term benefits from cooperation can outweigh short-term temptations to defect, particularly if APEC institutions foster trust and transparency. Ultimately, the analysis highlights the critical role of a strengthened APEC in promoting a stable and cooperative equilibrium, thereby fostering long-term economic prosperity for the entire Asia-Pacific region.

Suggested Citation

  • Phijaisanit, Euamporn, . "Can APEC Bridge the Divide? A Game Theory Approach to US-China Cooperation," Asian Journal of Applied Economics, Kasetsart University, Center for Applied Economics Research, vol. 31(2).
    • Handle: RePEc:ags:thkase:356814
    DOI: 10.22004/ag.econ.356814
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    References listed on IDEAS

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    Keywords

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    JEL classification:

    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
    • F15 - International Economics - - Trade - - - Economic Integration
    • F53 - International Economics - - International Relations, National Security, and International Political Economy - - - International Agreements and Observance; International Organizations
    • F55 - International Economics - - International Relations, National Security, and International Political Economy - - - International Institutional Arrangements

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