Using Trust Game for Cross-Strait Security Risk Analysis

Abstract

The interactions of the Mainland China offering benefits, the Taiwan benefits return, and the benefits of China Taiwan bilateral trust between the China and Taiwan are modeled as a trust game. The trust strategy is best re sponse for China and Taiwan if the benefit of China-Taiwan bilateral trust is increased based on Nash equilibrium analysis. This study simulated a mixed strategy Nash equilibrium. Experimental results show that the China’s expected payoffs of N.E. fix and Taiwan’s expected payoffs of N.E. are increased if the payoffs of China-Taiwan bilateral trust are increased. The Chinese mainland released new measures on exchanges and cooperation with Taiwan. Taiwan accepts these measures results in favor of Taiwan’s expected payoffs and decreases the level of risk.