The fascinating thing about the concept of Game Theory is its relevance in many every day decision-making in the real world. Game Theory involves players that have strategies that may result in payoffs, whether good or bad results.
These underlying principles are prevalent in the economies of China and the U.S., as difficult decisions regarding tariffs have strong impacts in the respective economies. Currently, Trump’s decisions on the current trade deal focus on increasing U.S. exports but ignore China subsidies for specific industries. The payoff of this decision is low as China is displeased with the agreement; the U.S. should seek to emulate decisions that would benefit both sides.
Trump was only agreeing with these decisions since it was evaluated by economists that state-led industrial policy was wasteful and ineffective. However, the payoff matrix changed because of a new evaluation of China’s trade and commercial practices, which state these policies are actually effective. And as a result, the payoff for the decision demanding China to abandon polices to promote indigenous companies should be much lower than what Trump’s team have predicted.
I chose to write about the economic policies related to Trump and China because of the impacts Trump’s potential payoff matrices could have to the quality of life in the U.S. It shows that no matter how broad the concept is in the course, it can always be correlated to real world scenarios.