Strategic Stalemate: A Game Theoretic Analysis of India-China Relations amidst Border Tensions - By Col Raja Wangdi Sherpa

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The ‘Game Theory : What is it?’

Game Theory is described as a mathematical theory of decision making in a conflict situation. However, there are several restrictions on the type of conflict and their amenability to analysis. It is important to understand that Game Theory neither provides any magical formula to solve difficult planning situations, nor offers undue hope of simplifying the decision process. To consider an estimate from the Game Theory point of view requires a higher degree of analysis and logical thought than what we use in present planning doctrine.

Various conflict situations were studied for the first time in 1944 by Von Newman, a Hungarian born American mathematician and Oskar Morginstern, a German economist, and their speculations were published in their book 'Theory of Games and Economic Behaviour'. Since then, practical applications of the theory have been made in tactical situations, weapon system analysis, logistics and economics. However, more important to the military planner is the fact that the implications of the theory can be brought to bear on situations more complicated and less precise than those to which it was applied originally.

The Prisoner’ Dilemma

The Prisoner’s Dilemma is a key concept in game theory that describes a situation in which two parties may not cooperate, even if it is in their best interest, because they lack trust or fear of the other party’s defection. This theory can be applied to understand the complex dynamics of India-China relations, particularly in the context of China’s assertiveness and belligerence.

Applying the Prisoner’s Dilemma to India-China Relations

In the context of India-China relations, the Prisoner’s Dilemma theory suggests that while both countries may benefit from cooperation, the mutual distrust and fear of betrayal (exacerbated by China’s belligerence) push both towards strategies that maintain the possibility of conflict. To overcome this dilemma will require incremental trust building, recalibration of geopolitical strategies and clearer communication to manage competition and avert escalatory moves. However, without such steps, the cycle of defection and mutual suspicion is likely to continue.

Strategic Choice and Trust Deficit. In the classic Prisoner’s Dilemma, two players (here, India and China) must decide independently whether to cooperate (peace and diplomacy) or defect (belligerence or conflict). If both countries cooperate, they will benefit through stability, economic growth and regional peace. However, if one defects while the other cooperates, the defector gains the upper hand (such as territorial advantages and military dominance), while the co-operating party suffers a loss. If both defect, they both experience negative consequences (escalating tensions, military conflicts and economic setbacks).

India and China face a similar dilemma, where trust is low, particularly after incidents such as the Doklam standoff (2017) and the Galwan Valley clashes (2020). While cooperation on trade, infrastructure and security would be beneficial, the fear of betrayal or unilateral aggression primarily driven by China’s belligerence keeps both countries in a state of tension.

China’s Belligerence as a Defection Strategy.     China’s growing assertiveness, manifested in its military incursions along the Line of Actual Control (LAC), its infrastructure build up in disputed areas and aggressive geopolitical posturing (like in the South China Sea or the Indo-Pacific) can be viewed as a form of “defection” in the Prisoner’s Dilemma. China may believe that by maintaining a dominant position, it can gain more from a potential conflict or force India into a weaker bargaining position, thus allowing it to expand its influence in South Asia.

India’s Response : Tit-for-Tat. In game theory, a common strategy to manage the Prisoner’s Dilemma is Tit-for-Tat, that is responding in kind to the other party’s move and this appears to be India’s approach. For example, after Chinese aggression at the Galwan Valley, India responded by strengthening its border defences, engaging diplomatically in the Quad alliance with US, Japan and Australia, and further recalibrating trade and investment policies to reduce dependence on China. India’s strategy is to signal that it is ready to defend its interests, but it is also open to cooperation if China steps back from its aggressive posture, as was seen in the latest border disengagement agreed to by both countries in the Ladakh sector.

Mutual Loss in Defection. Both India and China have much to lose from escalating tensions. Economically, they are key trading partners and any conflict would disrupt vital supply chains, hamper regional stability and divert resources from development to defence. However, the lack of trust leads both sides to remain cautious and often defensive, choosing limited cooperation, while preparing for conflict.

So, What are the Cooperation Barriers?

Historical Mistrust.  The unresolved 1962 Sino-Indian War and subsequent border disputes continue to be major sources of mistrust.

Geopolitical Rivalry. China’s influence in South Asia through projects like the China-Pakistan Economic Corridor (CPEC), India’s ties with US and the Quad are creating a competitive, zero sum atmosphere.

Perception of Threat.  India perceives China’s growing military and economic influence as a direct threat, while China views India’s alignment with the US and other democracies as an attempt to contain its rise.

Potential for Cooperation. Despite the tensions, cooperation is possible in certain areas such as climate change, trade and multilateral platforms like BRICS and SCO. As per the Prisoner’s Dilemma, for cooperation to emerge, trust-building measures like dialogue, confidence building steps and institutional agreements are essential. Both sides need credible assurances that cooperation will not be met with defection.

Quantified Analysis of India-China Situation using Game Theory Concepts 

To provide a quantified analysis of the India-China situation using game theory concepts like the Prisoner’s Dilemma and Nash Equilibrium, we would need to assign specific values to the different strategic choices like cooperation, conflict or defection for both countries. These values could represent factors like economic growth, military expenditure, geopolitical influence and costs of conflict. By analysing these numbers, we can better understand why the countries behave as they do and what incentives or disincentives guide their strategies.

Defining Key Variables

Economic Costs/ Benefits. China is India’s second largest trading partner. In 2023, bilateral trade was around $136 billion, with India running a trade deficit of $100 billion with China. India benefits from cheaper goods, but China’s trade dominance is a vulnerability. Towards military spending, India spent $83 billion on defence in 2023 (about 2.4% of GDP), while China spent $225 billion (about 1.7% of GDP), reflecting the economic burden and opportunity costs for both countries.

Strategic Costs/ Benefits. India’s alignment with the Quad brings security benefits but risks antagonising China further. China’s influence in South Asia through BRI projects and its close relationship with Pakistan helps contain India’s regional ambitions, but comes at the cost of increased hostility. Both India and China are investing billions in infrastructure and military presence along the LAC. 

Domestic Political Costs/ Benefits. For maintaining internal political stability, the domestic cost of escalation for both India and China includes the potential for national uneasiness, if casualties increase or economic sanctions disrupt growth. Leaders from both countries may face nationalist pressure to defend territorial integrity, adding to the costs of appearing “soft” on the border issue.

Payoff Matrix for the Prisoner’s Dilemma

We can assign estimated payoff values hypothetically based on potential outcomes. The payoff values could be based on a combination of economic impact, geopolitical positioning and military costs. In the scenario given below, cooperate means both countries de-escalate, negotiate diplomatically and maintain economic ties while avoiding conflict. Defect means one or both countries escalate militarily or strategically leading to confrontation and tensions.

India Cooperates (De-escalation), India Defects (Escalation). If China also cooperates  (5,5), it would result in peace, economic growth, mutual benefit from trade and regional stability. However, if India Defects and China Cooperates (3,6), China would benefit more leading to territorial and strategic gains, and India may face losses, both militarily and diplomatically due to conflict.

However, when India is Cooperating and China Defects (6,3), then India would lose both in terms of territory and geopolitical influence, while China makes gains. However, if both country’s defect (2,2), then both India and China would lose heavily in a military conflict, with economic and political fallout.

Interpretation of the Payoff Matrix

The Nash Equilibrium in this scenario would likely be the (2,2) outcome, both defecting or remaining in a state of cautious competition. This is because both countries fear the other’s defection and prefer to maintain military readiness and strategic rivalry, even though cooperation would be mutually beneficial. Neither country is willing to fully trust the other, leading to a sub-optimal but stable outcome. The current Nash Equilibrium for India-China relations likely reflects a state of cautious competition or limited confrontation. Both countries prioritise strategic defence and economic decoupling over full cooperation because they fear the other’s defection. This leads to a sub-optimal equilibrium (2,2), where both are worse off than they would be through cooperation, but neither is willing to change its strategy unilaterally. However, small shifts in economic or geopolitical factors could move the equilibrium towards more co-operative or more conflict-driven outcomes.

	India Cooperates	India Defects
China Cooperates	(5,5) : Both countries benefit economically and diplomatically from co-operation	(3,6) : China suffers moderate losses, while India plays it safe
China Defects	(6,3) : India suffers moderate losses, but China plays it safe	(2,2) :  Both countries engage in limited cooperation with modest gains

Source : Princeton University

Table 1 : Payoff Matrix for the Prisoner’s Dilemma

Stag Hunt Game (Coordination Game)

The Stag Hunt Game is a model that emphasizes the benefits of cooperation but also recognizes the risks, if one player chooses to defect. The central premise is that players can achieve better outcomes by cooperating, but the fear of defection often drives players to settle for a safer, less optimal outcome (like both hunting rabbits instead of stags).

In the context of India-China relations, this model can be used to represent the choices related to economic cooperation and geopolitical collaboration. If both countries work together (hunt the stag) and engage in genuine efforts to resolve border disputes, strengthen trade ties and collaborate on regional security issues, they could achieve significant benefits such as economic growth, trade and regional stability. 

However, if either country defects (examples like, through military posturing or protectionist trade policies), the other is forced to lower expectations and engage in limited economic exchanges or military escalation, which brings moderate but safer payoffs with less beneficial actions (like hunting rabbits).

Zero-Sum Game

In a Zero-Sum Game, any gain by one player is exactly offset by a loss to the other player. In other words, the total “pie” of benefits remains fixed, and if one country gains more geo-political influence or military advantage, it comes at the direct expense of the other.

If the situation between India and China is framed as a geopolitical zero-sum game, then any strategic or territorial gain by one country directly reduces the power and influence of the other. This approach is often relevant when discussing territorial disputes or influence over smaller regional states (example, India’s concerns over China’s role in Pakistan, Nepal or Sri Lanka).

To provide a scenario for the zero sum game, China’s support for Pakistan through the CPEC can be seen as a move that directly reduces India’s influence in the region. Similarly, India’s growing ties with the US and the Quad alliance are seen as moves to counter China’s influence in the Indo-Pacific, reducing China’s regional dominance.

In this model, the payoffs are structured so that a win for one side is a loss for the other. However, real world relations are rarely zero-sum, as both countries often have shared interests in economic stability or climate change co-operation that can lead to mutual benefits, even in adversarial relationships.

Minimax Strategy

The Minimax strategy is often used when a player assumes the worst case scenario and tries to minimise their maximum possible loss. This is useful in highly adversarial situations where trust is low and the priority is on securing the best possible outcome under the assumption that the other player will take the most harmful action. India and China, due to a history of distrust (border skirmishes and differing geopolitical objectives) may adopt a minimax strategy by focusing on worst case scenarios. Each country calculates its actions based on minimising potential losses from a military conflict, diplomatic breakdown or economic decoupling.

India’s Minimax Strategy. India’ minimax strategy centres on avoiding strategic or territorial losses even if China escalates aggressively. To achieve this, India has put forth a forward leaning military posture with permanent troop deployments in critical sectors of Eastern Ladakh, Sikkim and Arunachal Pradesh. It has accelerated the development of border infrastructure to include roads, tunnels and airstrips, ensuring mobility and logistics support in high altitude areas. India is also investing heavily in surveillance and early warning technologies such as drones and satellites, as was seen in the recent skirmish with Pakistan, to prevent strategic surprises. On the diplomatic front, India is deepening ties with Quad members and European partners to avoid strategic isolation, especially if tensions with China rise. Economically, India is hedging against Chinese leverage by reducing its dependency on imports from China, screening Chinese investments and promoting indigenous manufacturing. In the digital and cyber domain, India has imposed bans on certain Chinese apps and is bolstering its cyber security framework to safeguard critical infrastructure.

India’s worst case scenario, the outcome it may seek to avoid is a situation where China achieves tactical surprise, occupies some territory and erodes India’s regional standing without firing a shot. Thus, India’s minimax strategy is built around deterrence and not aggressive provocation, with enough credible strength and partnerships to dissuade China from testing India’s red lines.

China’s Minimax Strategy.  China’s minimax strategy is shaped by different set of priorities. China’s objective is to avoid a two front geo-political confrontation, particularly with India on one side and the US led alliances (Taiwan) on the other, while it continues to assert its claims and maintain leverage over border disputes. Its military infrastructure in Tibet, combined with infrastructure to support rapid mobility, gives it an upper hand in logistics. Beijing is however cautious about triggering a wider conflict that could damage its economic rise or provoke strong international backlash. Diplomatically, China uses platforms like BRICS and the Shanghai Cooperation Organisation (SCO) to keep India engaged, and to prevent it from fully aligning with the West. China also relies on its market size to retain influence over Indian businesses and investments, despite recent restrictions. Additionally, it maintains strategic ambiguity through cyber operations and satellite surveillance, keeping pressure on India without overt escalation.

China’s worst case scenario could be the emergence of a full fledged military and diplomatic alignment between India and the West, and India becomes a frontline state in an Indo-Pacific containment strategy. This would stretch China’s resources, hurt its global image and risk domestic political repercussions in the event of a military stalemate. As such, China’s minimax strategy favours measured assertiveness continuing to press its claims while avoiding actions that would push India into a formal anti-China bloc.

Expected Utility Theory

Expected Utility Theory is a decision making model that suggests players choose actions based on their expected outcomes, weighing the probability of each outcome and its associated utility (payoff). It is more flexible and accounts for uncertainty which is particularly useful when future outcomes are hard to predict.

India’s Expected Utility.  India could calculate the potential benefits of cooperating with China (greater trade, reduced military spending) versus the risks (China’s territorial ambitions, Quad’s reaction and internal political pressure). If the probability of co-operation leading to tangible economic benefits is high enough, and the risk of conflict can be managed, India may lean towards engagement rather than confrontation.

China’s Expected Utility.  China, similarly, would weigh the utility of keeping India in a controlled state of competition (through border provocations and regional diplomacy) versus the benefits of improved trade ties. If China calculates that India’s economic and military rise poses a significant threat in the long term, it may choose to keep relations competitive while balancing the economic costs.

Analysis of Models in Application to India China Relations

India and China are engaged in a repeated game. In these models, the time dimension allows for more complex strategies, including periods of competition followed by cooperation, based on each country’s response to past moves. Each model offers different insights into the risks, benefits and strategic choices both countries face in their complex relationship. Stag Hunt Model highlights the benefits of cooperation but recognises the fear of defection. The Zero Sum Game can be applied when strategic gains come directly at the expense of the other. The Minimax Strategy focuses on minimising maximum losses in a high risk, low trust environment and the Expected Utility Theory accounts for probability and uncertainty in strategic decision making.

Strategies India Could Adopt Based on Game Theory Models

The game theoretic insights can be applied more deeply to the India-China strategic relationship, drawing strategies for India from real world contexts, geo-political competition and behavioural strategy. Here’s a nuanced look at how India could formulate policies and responses based on game theory models.

Prisoner’s Dilemma Model : Cooperation vs Defection

Scenario. Border disputes, military posturing (examples are Doklam and Galwan).

Game Theory Insight. Both nations benefit from cooperation (peace, trade) but there may be an incentive to defect (military aggression, expansionism).

India’s Likely Strategy. Tit-for-Tat, by responding to China’s moves symmetrically through cooperation for cooperation or defection for defection to build a reputation of reciprocity and mirror Chinese actions. India could also emphasise on long term mutual benefits through multilateral talks like BRICS and SCO to           disincentivize one off betrayals.

Minimax : Strategic Brinkmanship

Scenario.  Military standoffs or the Taiwan issue.

Game Theory Insight. Both players risk catastrophe if neither backs down, but each wants the other to yield first.

India’s Likely Strategy. Calculated Signalling to project strength via strategic partnerships like Quad and Indo-Pacific cooperation with US, Japan and Australia. India’s responses may also include asymmetric activities to avoid direct symmetrical escalation with China, instead, India may exploit non-military tools like trade restrictions, digital decoupling and alliances.

Stag Hunt Model : Trust-Based Cooperation

Scenario. Climate change, regional infrastructure projects and counter terrorism.

Game Theory Insight. Cooperation yields the best outcome, but requires mutual trust.

India’s Likely Strategy. Conditional Engagement to collaborate only when there are trust building mechanisms in place and multilateral forums like G20, AIIB and SCO to engage China under rule based systems.

Zero-Sum vs Non-Zero Sum Games

Scenario. Competition for influence in South Asia and Africa.

Game Theory Insight. Perception of zero-sum leads to hard balancing and recognising

non-zero sum enables strategic co-existence.

India’s Strategy. Strategic Autonomy to avoid full fledged alignment with Western blocs and also maintain independent diplomacy to prevent direct confrontation. India may also follow Selective Collaboration to co-operate in non-zero sum areas like anti-piracy operations or HADR response, even while competing in other arenas.

Nash Equilibrium and Best Response Strategy

Scenario.  Trade, digital infrastructure and supply chains.

Game Theory Insight. Nations settle into a stable strategy where neither has an incentive to deviate unilaterally.

India’s Strategy. Economic Resilience to build alternatives to Chinese supply chains and thus increase bargaining power. India also requires Digital Sovereignty and needs to invest in indigenous technology to create best response strategy independent of Chinese influence.

Concluding Thoughts

The application of Game Theory to India China relations offers valuable insights into the strategic interactions between the two countries, particularly in areas like border disputes, trade relations and geopolitical positioning. Game theory highlights the importance of both competition and cooperation, as each country makes decisions based on expectations of the other’s actions. It shows that mutual cooperation can be beneficial, such as in trade or climate agreements, but the potential for conflict exists, if either side believes they can gain an advantage by acting aggressively or unilaterally, especially in border conflicts.

In the context of border tensions, Game Theory explains the cyclical nature of conflict and negotiations, where both nations weigh the costs of confrontation against the benefits of maintaining peace. The Nash Equilibrium, in many cases, would suggest that neither India nor China would escalate conflict if they expect significant losses in return. However, the lack of trust and strategic posturing often results in a “Prisoner’s Dilemma” situation, where both sides may feel compelled to increase military presence or influence in contested regions despite the higher costs involved.

Overall, Game Theory underscores the importance of signalling, communication and credible commitments in managing India China relations. Both sides want to avoid open war, but each is preparing with the scepticism the other may escalate, thus creating a delicate balance of deterrence, diplomacy and economic manoeuvring. While it can be a tool for both escalation and diplomacy, the theory highlights the challenges in achieving stable co-operation without strong trust building mechanisms.

Notes

1. Von Newman and Morgenstern : Theory of Games and Economic Behaviour

2. J F Nash : Non- Cooperative Games

3. R B Myerson : Game Theory : Analysis of Conflict

4. P Milgrom and J Roberts : Research Paper on Rationalizability, Learning and Equilibrium in Games

5. Sanjay Kumar Singh : Game Theoretic Analysis for Ladakh Stand Off : 2020

About the Author

Col Raja Wangdi Sherpa was commissioned into the ASSAM Regiment in Jun 2004. He has been an Instructor in Infantry School, Mhow and has served in active operations in Jammu and Kashmir and along the Northern Borders. The officer has tenanted the appointment of Chief Operations Officer in United Nations Interim Force in Lebanon and has been a  GSO-1  of a Brigade in a Strike Corps along the Western Front. The Officer commanded 16 ASSAM Regiment during Operation Snow Leopard and has undergone the prestigious Higher Defence Management Course. The officer is presently posted as Directing Staff at DSSC, Wellington.

(The views expressed are those of the author and do not reflect the views of C3S.)