Differential Game Analysis of Cross-Border Data Flow Regulation Under Technological Progress

Abstract

The issue of regulation of cross-border data flows is one of the difficulties in digital trade negotiations among countries. This paper considers three cross-border data flow regulation scenarios under technological progress: namely, unilateral, bilateral and trilateral cross-border data flow regulation. By constructing a differential game model, the game equilibrium strategies under the three scenarios are solved and analyzed. The results show that in the unilateral scenario, the higher the digital technology level of the data importing country, the lower the actual cross-border data restriction index of the data exporting country. In the bilateral scenario, when a country’s digital technology is relatively low, its government regulation is high and it tends to adopt a “defensive” cross-border data flow policy. In the trilateral case, due to the existence of double digital trade barriers and other effects, the actual cross-border data restriction index of a country in the middle of the digital technology level is much higher than that of a country at the bottom of the digital technology level; a country at the bottom of the digital technology level is more restrictive than a country in the middle of the digital technology level than a country at the top of the digital technology level.