Question

Incorporate the concepts of game theory to international trade and tariffs. Set up two payoff matrices. Set up the first payoff matrix such that the outcome will be harmful to both countries. Set up the second payoff matrix such that the outcome will be beneficial to the United States. From your perspective as a consumer, evaluate the two matrices using current actions by each country to see which most likely benefits domestic consumers.

Answer 1

Ans.

- Nash equilibrium is available when at least two members in a non-helpful game have no motivating force to go amiss from their individual equilibrium procedures after they have thought of and foreseen their rival's levelheaded decisions or systems.

- In the setting of oligopoly markets, the Nash equilibrium is an equilibrium characterized by the trademark that none of the oligopolists can expand its benefits by singularly changing its valuing methodology. The supposition that is made that each taking an interest firm does as well as can be expected, given the responses of its opponents.

- The firms in the oligopoly showcase have associated activities. The activities are non-helpful, with each firm creation choices that boost its own benefits. The organizations don't conspire with an end goal to augment joint benefits. The equilibrium is arrived at when all organizations are doing as well as can be expected, given the activities of their opponents.

- Payoff Matrix between 2 countries for the Foeign trade and tariff can be calculated as follows :

Nash equilibrium is reached when there is no Tariff from the consumer point of view.