Analysis on Open Account in China from the Perspective of Prisoners’ Dilemma

Abstract

Open account is a common behavior in international trade. There are such cases that exporters suffered great loss when importers suddenly disappear even they had successful corporation previously. To avoid loss, consigner should stop corporation when he thinks his partner could not afford to fulfill the contract, which shows a great similarity with prisoners’ dilemma. In prisoners’ dilemma, according to backward induction, both players should not corporate in the beginning. However, most of the players will corporate at first, and tend to defect near the end. This paper contains current studies of open account and the result of interview done by the author. The experiment method used in this paper is interview of export traders by phone calls. Interviewees includes manager of risk control center of Xiamen ITG Group Corp, a Fortune 500 company. The interview has showed current situation of open account behavior in China, major methods of preventing loss, changes during the pandemic, and so on. In conclusion, the author suggest enterprises in China to seize the current opportunity, and use more open account to expand.