Balancing Power

How can the United States effectively support Taiwan in deterring Chinese aggression while minimizing the risk of escalation to full-scale conflict? This study first builds a game-theoretic model to analyze the strategic dynamics of U.S.-China-Taiwan relations, capturing the interplay of adversarial strategies under uncertainty. It then integrates empirical data to solve the model, deriving mixed strategy Nash equilibria for two key scenarios: coercive diplomacy and full-scale invasion. The results reveal that China favors coercive diplomacy due to its lower costs. At the same time, the United States achieves the most stability with a balanced approach of favoring diplomatic support and using credible military deterrence. The empirical findings highlight that escalation leads to net losses for both sides, reinforcing the strategic value of maintaining the status quo. This study provides a comprehensive framework to assess the current situation and offers actionable insights to deter aggression, sustain stability, and manage escalation risks effectively. The adaptable model can update as new empirical data and geopolitical dynamics emerge, ensuring its continued relevance.