Application of Game Theory to International Trade
Introduction
Game Theory is a general mathematical analysis to investigate
the strategic interactions among players.
The structure of a game is as follows:
 In our examples, we will assume that there are two players, and
that each has two choices.
- We assume that the players are selfish (operate in their own
best interests) and rational (choose the best options available).
- A strategy is the object that a player can control.
- A payoff is the profit from a given pair of choices.
- In our examples, we use the notation (m, n)
to indicate a payoff of m to player 1 and n to player 2
as a result of a particular pair of choices.
- An equilibrium point is a pair of choices (one by each player)
where neither player can improve their own position by changing their
choice unilaterally.
Application and Examples
- Games with Dominant Strategy Equilibrium
- Cartel
- Prisoner's Dilemma
- Application to International Economics: Free Trade and Protection
- Games with Nash Equilibrium
- Battle of the Sexes
- Game of Chicken
- Strategic Trade Policies using Game Theory
- Airbus and Boeing
- Monopolist and New Entrant in the World Market
- Imperfect Information
 Dumping (Persistent)
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 Games with Dominant Strategy Equilibrium
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 Trade Policies
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Copyright © 1997, 1998, 2001 Dr MoonJoong Tcha
(mtcha@ecel.uwa.edu.au)
Web site created by
First Step Communications
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