TROY D. SMITH, MARCO HAFNER, BRUCE W. BENNETT
Engaging with North Korea
Lessons from Game Theory
A
change of leadership in Washington provides an opportunity to once again reevaluate the
relationship between the United States and North Korea and to figure out ways to move
forward productively. In this report, we draw on intuition from game theory to better
understand the situation with North Korea as it stands in early 2021. The goal is to pro-
vide insights and recommendations for the new U.S. presidential administration. These insights
and recommendations are based on game theoretic analysis of how to deal with Kim Jong-un, the
leader of North Korea, and the situation on the Korean peninsula; specifically, negotiations on
denuclearization.
Game theory's early applications thought through strategic considerations that involved the use
of nuclear weapons and how to prevent conflict and deter the Soviet Union from using its weapons
or expanding its borders. Although Kim Jong-un and the North Korea of today are very different
than Joseph Stalin and the Soviet Union of the early 1950s, game theoretic concepts remain useful
in analyzing the situation and thinking through possible responses.
Game theory is widely used to study the interactions of actors, such as individuals, firms, and
countries. Formally, a game is defined by four key elements: the players, the rules, the possible out-
comes, and the payoffs (Mas-Colell, Whinston, and Green, 1995). Unlike other areas in economics
in which an agent is maximizing personal benefits given outside constraints, game theory is char-
acterized by strategic interdependence—each player’s best action depends on what that individual
believes the other players will do. A plan for a given player that details how to proceed through the
game is called a strategy. A game theoretic strategy must be a “complete plan for action, covering all
contingencies” (Snidal, 1985, p. 37). This means that a complete strategy must tell a player what to do
at any potential point in the game, even in situations that are not likely to happen. A strategy that is
expected to lead to the player's best potential outcome given what all other players are likely to do and
in which no player has an incentive to unilaterally deviate from their course of action is called a Nash
equilibrium. It was named after Nobel Prize winner John Nash, who first articulated the concept.
We can characterize the situation with North Korea in a game theoretic context to help us to
better understand some of the potential issues that are involved. In this framework, the players in
the game would include some subset (possibly all) of the countries that participated in the six-party
talks—which occurred from 2003 to April 2009—and would discuss North Korea’s withdrawal from
the Treaty on the Non-Proliferation of Nuclear Weapons (NPT). These countries—North Korea,
South Korea, the United States, China, Japan, and Russia—all have intense interests in what happens
on the Korean peninsula, as well as various goals and strategic objectives, many of which will likely
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