A Game-Theoretic Approach to Political Characteristics of East-West Trade

Abstract

The article focuses on game-theoretic explanations of some special features of East- West trade. In particular, the fact that there is a rather low level of economic cooperation between the parties, even though a higher level would undoubtedly benefit both, is discussed in the light of the Edgeworth Box and elementary games. The games utilized in the explanation and analysis are 2 x 2 games of non-zero-sum variety. Moreover, we discuss the role of threats and 'envy' as determinants of the outcomes. We argue that the rather simple apparatus we use goes a long way towards explaining why there is some cooperation between East and West and, on the other hand, why its level is low.