As the regional problems are usually regarded as a result of'market failure', traditional regional economic policies are basically based on the assumed rationality of 'government intervention'and concerned mainly the benefit of objective area. Considering the fact that many regional policies aiming at enhancing the benefit of the objective area have resulted in the negative effect on the benefit of non objective area at the same time, we attempt to study the regional policy issue with application of game theory. Firstly, we analyze the driving forces for regional division. Based on the hypothesis that the motivation for a region to take part in the regional cooperation and division is the increased benefits, we compare the ratio of benefits to cost, and find that the exchange ratio of specialized products of two regions is the main decisive element. Then, we probe into the effect of economic policy on the dynamics of regional competition and regional division. Different regional policies will change the game model of regional competition and division through changes of regional benefits. Also, we find that the reasonable exchange ratio of specialized products in division should be based on the ratio of product cost before division. At last, we give a game theory analysis of the effect of China's regional policy. Many regional problems in the development of China's regional economy were largely the result of playing games at regional level in order to maximize each region's own benefits. Especially, unreasonable price system gave limitations to the development of regional cooperation and division.As a whole, some conclusions have been achieved as follows: (1)It is the economic benefit that motivates a region to take part in regional division. (2)The price ratio on of the specialized products is the main element that works on the process and result of regional competition and division. (3)The regional policy particularly set out for one area will influence all areas that have economic relations with it.