Ciara: blog post #3

Ciara Farrell

Blog post #3

Game theory can promote cooperation in economic affairs by putting meaning behind decision making. Taking notice that countries will most likely have future affairs will dictate the way they act in their current decision making. Knowing that states have to work together in future endeavors, they need to expect that every play is going to affect the next one. This theory also goes the other way in that states who have less future decisions that need to be made together will play with a one game mindset, leaving them being less cooperative and more selfish. In an instance where there is only one decision that needs to be made, states will use it to make sure they are getting the maximum benefit without putting any reliance on the other country to do the same. This is why states are more likely to think for themselves and make selfish moves that might not even lead them to the best outcome.

The US has found itself to be involved in many free trade agreements with multiple countries. Being involved in these agreements means that the deals are ongoing and the US needs to maintain relationships with the countries that are in agreement with free trade. The Free Trade Agreements (FTA’s) mean that the US maintains strong relationships with the countries and uses trade to mutually benefit both countries. The US, due to what game theory tells us about international trade, will never do anything to take advantage of these countries and would allow for the satisfaction of the states associated with each trade. The opposite of these would be the relationship between Russia and the rest of the world currently. Russia has found themselves in a situation, following their violent actions, in which their actions are so salient that future interactions with other states is not in the calculus. This is because Russia has made a choice to put themselves against others as they most likely believe they can overtake whatever problems will arise from their decisions. This is selfish and within game theory it can explain that Russia most likely is not trying to build future relations as well as playing a single “game” that benefits only them in the best way in their mind. 

Playing Prisoner’s Dilemma in class really showed the consequences that every action has on countries as well as their relationships with other countries. In my Economics 101 class we played a similar game with money. We could push $400 to the other person or pull $300 to ourselves. When I played multiple rounds with the same person it was more likely we would both push but when it got to the last round, my partner pulled their money leaving me with none that round and them with $700. Countries will similarly act in a selfish manner knowing that being greedy will have no future affect on their affairs leaving them, hopefully, with benefits in the outcome while the other country is left with nothing. Decisions are made with intention and game theory allows people to see how the maximum benefit can come when both countries act selflessly for the iteration of future events. When states want, “a reputation for reliability,” and,  “for resisting temptation,” they are likely to act in a way that will be successful for all parties involved (Oye 14). Game theory and having knowledge about the way it works will lead to advantages over others who are not thinking about their future and lacking level headed play. 

Cooperation in economic affairs are likely to happen when things are being broken down into smaller parts such as a trade deal that goes on for a long period of time as opposed to all trade being done at once. The continuous interactions between countries especially in these types of deals allow for them to understand the effect that a small bad move could lead to tension and future bad moves. Game theory can allow countries to understand how they should go about these affairs and know that longer term relationships allow for more cooperation in the future. This leads to deals being struck up as well as more benefits for both parties. Game theory overall helps people understand the way international economics works when dealing with social matters and getting the most benefits.