On the basis of a brief introduction of game theory, this paper incorporates classical game models such as Prisoners Dilemma, Boxed Pigs, Chicken Game and Bargaining Game to simulate the existing games in domain of hydraulic and hydropower construction in China. Game analyses show that the traditional investment arrangement relying on the central government is not able to achieve optimized resource allocation; the central government's intervention is necessary in coordinating the local governments, located at the upstream and the downstream; contention of engineering projects and apportionment of investment not only imply the conflict in economic benefit and rationalities of each participant himself, butalso will be determined by interaction and influence among participants each other.