China’s Belt-Road Initiative: The political economy of coordinated coalitional cooperation

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.