The methodology of game theory and its application to study the international economic relationships during the COVID-19 pandemic - The economic conflict between the US and China - as an applied example.

Abstract

This study aims to introduce the game theory approach and its application to study the international economic relationships during the COVID-19 pandemic. The economic conflict between the US and China was chosen as an applied example of this methodology regarding their race to dominate trade, finance, and global technology. These factors may lead to fundamental changes to the current global economic system. This study introduces the game theory methodology and its application to illustrate the mechanism of economic conflict between the two largest economies in the world during the repercussions of the COVID-19 pandemic taking into account the most important factors, such as the US public debt and the supremacy of technology. We gave an overview of the US and Chinese economies and reviewed the expected economic strategies from both countries and reformulate them into possible scenarios and presented them in a matrix of strategic options. This matrix is analyzed according to the game theory methodology. Results showed, a theoretical Nash equilibrium may be achieved between the US and China, by reaching an agreement that satisfies both countries, so that benefits and losses are shared proportionally. The agreement may provide a better return for each country. The study recommended the potential usage of game theory in explaining theoretically the mechanism of international economic conflict and predicting its results. It can be used to predict some economic equilibrium (such as the Nash equilibrium) which is useful in building and coordinating economic and strategic plans in dealing with competing countries.