CHAPTER 3. Conceptual Framework
A. Definition of Relational Zones in Economic Interactions
The Relational Zone Economics (RZE) model posits that economic interactions cannot be fully captured by binary classifications of cooperation and competition, nor by singular metrics such as utility maximization or payoff matrices. Instead, we introduce six dynamic relational zones that serve as cognitive, emotional, and strategic positioning frameworks through which economic agents interact over time. Each zone encapsulates a distinct configuration of trust, ambiguity, and intent, which interact with memory and foresight mechanisms.
These zones are not static labels but represent temporal and adaptive states in the relational evolution between economic actors---firms, individuals, institutions, or nations.
1. White Zone (Neutral / Non-Engagement)
Definition: A relational baseline in which no meaningful interaction, expectation, or emotional charge exists between parties.
Economic Analogy: First-time market encounters, unknown competitors, or idle economic agents in a market system.
Function: Serves as a relational origin point or default state prior to trust-building or conflict.
Dynamic Potential: Can evolve into any other zone depending on emerging interactions, incentives, or shared interests.
2. Green Zone (Mutualistic Trust and Support)
Definition: A state of high trust, mutual benefit, and positive expectation between economic agents.
Economic Examples: Stable business partnerships, long-term contracts with relational governance, trade agreements grounded in mutual gain.
Mechanism: Reinforced by positive memory traces, transparent intentions, and aligned incentives over time.
Implication: Increases system resilience and reduces transaction costs ( la Coase), promoting emergent cooperation.
3. Yellow Zone (Strategic Ambiguity / Conditional Engagement)
Definition: A transitional or fluid zone characterized by partial trust, calculated ambiguity, and conditional cooperation.
Economic Analogy: Negotiations, speculative investments, political trade-offs, or early-stage venture agreements.
Core Feature: Both parties withhold full information or intention strategically, anticipating future alignment or divergence.
Significance: The zone of strategic maneuvering---central to dynamic games and incomplete information scenarios (cf. Bayesian games).
4. Red Zone (Open Conflict / Active Competition)
Definition: A relational state marked by visible tension, aggressive tactics, or zero-sum competition.
Economic Examples: Price wars, litigation battles, trade sanctions, hostile takeovers.
Mechanism: Triggered by breakdowns in trust, perceived exploitation, or external shocks that expose misaligned goals.
Note: Not always pathological---Red Zone interactions may be essential for creative destruction or bargaining leverage.
5. Black Zone (Betrayal / Malicious Intent)
Definition: A deep rupture in relational integrity, defined by deliberate deception, manipulation, or predation.
Economic Analogues: Fraud, insider trading, pyramid schemes, exploitative monopolies.
Memory Effect: Black zone entries leave long-lasting scars on system memory, reducing future cooperative probabilities.
Relevance: Exposes the limits of trust-based or behavioral economics, demanding a zone-aware modeling approach.
6. Clear Zone (Transcendent Foresight and Relational Insight)
Definition: A meta-zone in which actors operate with systemic vision, ethical clarity, and intertemporal strategy.
Economic Analogy: Institutional leadership during crises, transformative entrepreneurship, stewarding global commons.
Function: Synthesizes past memory and future vision, enabling actors to transcend reactive cycles of trust and betrayal.
Theoretical Innovation: This zone challenges traditional equilibrium thinking, emphasizing relational meta-stability and long-term coordination (e.g., in climate action, cooperative ecosystems, or BRI-scale projects).
Inter-Zonal Dynamics
