Question

Tit-for-tat involves playing cooperatively at first, then doing whatever the other player did in the previous period.

When firms limit production and raise prices in a way that raises each others’ profits, even though they have not made any formal agreement, they are engaged in tacit collusion. With International Trade these days, we have what has been called a “Tariff War.” NOW, what may have begun as a “one-off” game, has become a repeated game.

1. Explain how this “Tit-for-Tat” repeated game applies to International Trade tariffs

2. With the coronavirus now altering life, what are the implications regarding tariffs and “winning.”

Answer 1

Answer 1Tit for tat is highly effective strategy in game theory .An agent using this strategy will first cooperate then subsequently replicate an opponent "s previous action.if the opponent previously was cooperative,the agent is cooperarive.if not,the agent is not.A trade war happen when one country retaliates against another by raising imports tarrif or placing other restrictions on the other countries's import.

Tit for tat games apply in international tarrif recently between two powerful countries.Trade war can commence if one country percieves a competetor nation has unfair trading practises .therefore,if the tit for tat strategy begins with cooperation ,then cooperative ensure.On the other hand ,if the other party compete than the tit for tat strategy will lead the alternate party to the compete as well.

Answe 2.) Tariff are a tax placed by the government on imports. They raise the price for consumers, leads to decline in imports and can lead to retaliation by other countries. Tariff are important barriers to free trade, they are often imposed to protect domestic industry from cheap imports. However, it often  leads to retaliation with other countries placing tariff on their exports.

If tariff rates are increased, it leads to the decline of imports. During coronavirus period where life is changing, government can impose tariff for following reasons-

a.) Raising revenues- If a country produce no gold, levying a tax on gold import will raise money as people will have no alternative.

b.) Environmental- A tariff could be placed on goods which have negative effect.

c.) Protectionism- The most common reason for a tariff- imposing import tariff make domestic firms more competitive.