Prospect theory,operational code analysis,and risk-taking behaviour: a new model of China’s crisis behaviour

Integrating prospect theory and operational code analysis, this paper introduces an innovative approach to studying the decision making of Chinese leaders during crises. The unique contribution of this paper is to adopt the methodology of operational code analysis to measure the domain of actions of policy makers in the application of prospect theory. We suggest that leaders’ operational code beliefs can help us to identify in which domain of actions (gains or losses) leaders are located during crises. Xi Jinping experienced two notable foreign policy crises in 2014, the ‘oil rig’ crisis with Vietnam and the ‘P-8 crisis’ with the United States, which are examined in detail to illustrate Xi’s operational code beliefs and risk-taking behaviour of ‘confident accommodation’ behaviour during crises. To test the process validity of integrating operational code analysis and prospect theory, Hu Jintao’s operational code beliefs and crisis behaviour in 2011–2012 are then compared to Xi’s beliefs and decisions in this study of China’s crisis behaviour.