If these values hold true, the government would accommodate if Google threats to pull out, because the expected payoff to fight (0.2*1+0.8*0=0.2) is smaller than the payoff to fight (0.2*0+0.8*1=0.8). Should Google choose to do nothing, the government would choose to fight.

This was probably what Google had in mind before making this move, but there were too many assumptions behind this kind of wishful thinking. Most significantly, the estimations about the government payoffs can be very inaccurate. So you bet, the company is doing everything it can to decrease the government payoffs for the fight option.

Related readings:  Comment: Google is simply not successful in China  No report from Google yet: Ministry of Commerce  Microsoft browser flaw exposed Google to hackers  Google's exit threat felt beyond Internet

Simply put, Google believes it can force the Chinese government to meet its market demands if it threats to pull out. To ensure this to happen, the company employs a wide array of tactics to make it painful for the Chinese government to fight. Here are some of the things they did:

Conspiracy theory. There is one thing that can cause a lot of damage to China: a reputation that China is a hostile and dangerous business environment. Google fancies a stereotypical Hollywood story to prove this point, but a rather boring story indeed.

The human rights card. There are two favorite weapons for the western media and politicians to use to attack China: human rights and freedom of speech. Not surprisingly, Google manages to incorporate both in its statement and has so far successfully garnered a lot of support. Read this Op-Ed from New York Times titled "Google takes a stand". But you don’t have to click the link to know what picture is drawn: upright small guy against big evil monster.

"We are not alone." Google also mentioned in its statement a lot of other large companies were in the same boat with them, and wanted to send a signal to the Chinese government: you might face more enemies than you thought if you choose to fight. Of course, Google didn’t forget to mention that it is "also working with the relevant U.S. authorities."

Anyways, it might be still true that Google is doing all these simply because its China operations are against the company values, but I am not convinced. To avoid cyber attack? Come on, I just don’t think Google is that fragile. To protect human rights and freedom of speech in China? Really, then how is pulling out helping China to improve its freedom of speech?

In 2006, Google's CEO, Eric Schmidt, was quoted saying, "We will take a long-term view to win in China. The Chinese have 5,000 years of history. Google has 5,000 years of patience in China." Well, the patience has lasted for three years so far. It’s going to be interesting to see what will happen in the next 4,997 years.

Jeff Pan is an MBA student at Duke University in the US. You can reach him jeff.pan@fuqua.duke.edu

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