Association for Public Policy Analysis & Management

This paper applies the game theory method to analyze the dispute between China and Japan over the Senkaku/Diaoyu Islands. Most existing studies focused on using qualitative analysis to approach this issue, so my study attempts to make a contribution to the literature through formal modeling. Furthermore, since the two games models established in this paper use variables to represent the payoffs of each country, they offer frameworks for future scholars and policy makers to quantify the payoffs given different situations.

The static simultaneous model includes China and Japan as the two direct players in the game and defines the actions as non-military initiatives. This model also takes into account the influence of the United States and concludes that the dynamic changes of the US-China relations will have an impact on the Japan’s risk perception of taking actions. Given its focus on non-military actions, the model treats the U.S. as an indirect player. Specifically, when the U.S. seeks more cooperation with China to cope with certain issues (e.g., North Korea nuclear weapons threat), it will increase the Japanese government’s risk to take proactive initiatives on the Islands dispute; on the other hand, if the U.S.’s policy orientation is to curb China’s rise, this will reduce the risk for Japan to advance its interests in the Islands.

The second model is a sequential game based on the US-China-Japan security triangle. Different from the static simultaneous model, the U.S. is a direct player in this game for its’ military alliance with Japan according to the Treaty of San Francisco. Therefore, the U.S. government will decide whether to provide military assistance to Japan in a warfare. Since this game focuses on military actions and Japan currently has the actual control of the Islands, one of the assumptions is that China will be the first mover to decide whether to take military actions to resolve the dispute. Based on the principle of backward induction, the Chinese government’s choice will be determined by its calculation of the probability of winning the war and the likelihood of the U.S.’s intervention in the Sino-Japanese conflict. The equilibrium outcomes indicated that the U.S.’s potential military assistance to Japan will affect China’s calculation of taking military actions to solve the dispute.

Overall, the two models demonstrate the complexity of the US-China-Japan triangle over the Islands dispute and the subtle influence of the U.S. on the geopolitics in East Asia.