Page 15 - Azerbaijan State University of Economics

Salah Salimian, Mahdi Movahedi Beknazar, Kiumars Shahbazi, Zahra Khalilzadeh Silabi: The Role
of Investment in the Equilibrium of International Political Economy (Game Theory Approach)

2
= 0 ⇒ = − (8)

2

= 0 ⇒ = − (9)
8K 2
Now, by replacing Eq. 8 and 9 with each other, we will have:

2
= = 4 (10)
These relations show that the more b (the lower risk in foreign market) and K are
(economic power in local market), the more the risk and return inside the country will
be and vice versa.

1
= = − (11)

8 2
These relations show that the more b (the lower risk in foreign market) and K are
(economic power in local market), the more the risk and return outside the country
will be and vice versa.

Now, it is possible to obtain the utility of investor and countries with equations 10 and
11. Therefore, we have:

3
6
= −256

1
= −

As long as b and K are always positive, the outcome of investors will be negative.
This consequence shows that an increase in b (lower risk in foreign countries) and K
(economic power) would lead to a decrease in the utility of the investor. Moreover,
this equation shows that the utility of investors will be under risk (b) and not in range
(a).

On the other hand, the utility of countries shows that if the hostility degree between
countries ( ) is zero, then the countries will achieve the maximum positive outcome.
The obtained positive outcome depends on the economic power of countries (K). It
means that the less the economic power of countries is, the higher this utility will be.
This outcome leads the weak countries (economically) towards more pace.

These results confirm the results of Salimian et al. (2019) and Salimian & Almasifard
(2020).

15