This study introduces identity economics in the investigation of countries’ economic behaviour in the energy sector. Identity expresses the position of the agent within the socioeconomic context. Identity economics aims at depicting the role of said context in the agent’s utility function. In our study we look at country identity as linked to the set of economic opportunities viable to its position.

We extend the Akerlof and Kranton model (2000) to broaden its applicability at country level. We expand the notion of social categories and that of prescriptions, introducing responsive prescriptions, which allow the analyst to depict context validation, as well as context changes - the latter particularly relevant in a time of energy transition.

We present a game theoretical application portraying a possible collaboration between the Kingdom of Saudi Arabia and the United Arab Emirates for the development of a renewable energy initiative in Saudi Arabia. We present an extensive-form game with perfect information whose payoffs depict possible changes in relevant identities as outcome drivers, isolating identity dynamics to provide a framework of application for country identity economic analysis. Each country presents two relevant identities with opposite prescriptions, making them competitive.

We also build a measurement tool – the identity change indicator - to quantify identity changes. It depicts country responsibility and social category adherence as determinants of changes. We use the indicator to solve the aforementioned game through a scenario-based application. We obtain collaboration in all scenarios, provided the proposal takes place.

In the last part of the study, we use the indicator to monitor identity trends in Saudi Arabia. We focus on its diversification efforts investigating the shaping of the Kingdom’s “Diversified Economy” goal identity: an identity the country does not own, yet, but wants to obtain. We observe promising dynamics, albeit context validation is still lacking.