{"id":45927,"date":"2024-02-08T18:01:21","date_gmt":"2024-02-08T18:01:21","guid":{"rendered":"https:\/\/essays.homeworkacetutors.com\/2024\/02\/using-game-theory-to-predict-brexit-outcomes\/"},"modified":"2024-02-08T18:01:21","modified_gmt":"2024-02-08T18:01:21","slug":"using-game-theory-to-predict-brexit-outcomes","status":"publish","type":"post","link":"https:\/\/www.colapapers.com\/us\/using-game-theory-to-predict-brexit-outcomes\/","title":{"rendered":"Using Game Theory to Predict Brexit Outcomes"},"content":{"rendered":"
\n

\u201cConsider the negotiations over Brexit between the UK and the
\nEU. Use Game Theory to describe the players\u2019 strategies, their payoffs and how
\nthe game is played. Solve your model to predict the outcome(s).\u201d<\/em><\/strong><\/strong><\/p>\n

The essay thesis is that due to Brexit, the EU will achieve more
\nof its aim and objectives during negotiations than the UK will. The prediction
\nwhich is encompassed within my essay is that the EU controls the deal and they
\ncan chose to give the UK either a good or a bad one. As a result, the UK can
\neither accept the deal negotiated whether that be good or bad, even though they
\nmay have to pay \u00a350 billion to maintain access to the single market which is in
\nthe news currently. (Boffey<\/a>, Ramkin and
\nAsthana, 2017) Or the UK can reject the deal and exit from the EU without one.<\/p>\n

As reflected by McCulloch,
\n(2017)<\/strong> game theory was invented by John Nash who using a mathematical
\nstrategy which could determine the likely outcome of 2 or more players with
\nvaluations assigned for the range of potential outcomes. According to the
\nprinciples, a player will take action to try and secure the best deal to
\nimprove their bargaining power and therefore there no deal payoff to remain
\nstronger than the other player. (Muthoo, and Benita, 2017). <\/p>\n

The prediction of negotiation is supported through the use of a pay off matrix which seeks to identify the pros and cons of accepting the deal based on the negotiations. However, Britain has more to lose<\/a> than the whole of the EU so can be assumed that they will receive a worse deal as a consequence. The matrix is set up 2\u00d72 as shown below, which helps identify the combinations that are dominate, and the ones being dominated. This ensures Nash equilibrium can be detected which is defined by Core (2017) as \u2018A set of strategies, one for each player in the game, such that each player\u2019s strategy is a best response to the strategies chosen by everyone else.\u2019 In the negotiation this is the point when both the EU and the UK defect from their original course to observe and see what the opposing players are offering, as part of their negotiation. This would be the most favorable if both parties were to defect from the path allowing a stable outcome. <\/p>\n

\"\"<\/figure>\n

The number present in the bracket illustrates the benefit to that
\nplayer if the strategy is undertaken. As shown in the box on the matrix above,
\nthe first number is the result for the UK and the second is the EU. The
\nrelative size and comparison between the two numbers is important.<\/p>\n

The top tight cell indicates the strategy that the UK has accepted
\na good deal offered by the EU. According to my game, the outcome is still negative,
\nas in my opinion it is unlikely that the deal the UK accepts will give them the
\nsame full access to the single market which the UK currently has, this enables
\nthem to trade freely amongst each other without tariffs. (Cadman and Tetlow,
\n2017) However, as it is a good deal the loss cannot be that bad.<\/p>\n

The top left cell displays the UK accepting a bad deal offered by
\nthe EU, hence the more negative number than the right cell as the UK will be
\nworse off. In my opinion the payoff would be more negative, but it is the most
\nnegative for when the UK does not accept a deal yet leaves the EU regardless
\nwhether the deal offered was good or bad. This will detrimentally damage the
\nUK, consequently the UK should accept whatever deal is offered as accepting no
\ndeal would damage the future for the country in an economic and a political
\nsense.<\/p>\n

From the perspective of the EU, it would like to give the UK a
\ngood deal as it will benefit the EU economically in the future. However, it
\nwould want to punish the UK for deciding to leave and try and ensure that it
\nputs off other countries from leaving too. This is further discussed by
\nMaidment (2017) who quoted \u2018that two of the EU\u2019s top Brexit<\/a> chiefs want to \u201cpunish\u201d Britain to stop other
\ncountries trying to leave the bloc.\u2019<\/p>\n

In this situation, the dominant strategy for Britain which is
\ndefined by Core (2017) as \u2018Action that
\nyields the highest payoff for a player, no matter what the other players do.\u2019
\nIs for them to be granted with a good deal for example maintaining access to
\nthe single market without having to pay the \u00a350 billion, this has the potential
\nto result in the highest pay off. In comparison, the EU has the dominant
\nstrategy if Britain are not part of the EU with a higher pay off.<\/p>\n

The outcome is determined due to a combination of political as
\nwell as economic costs to the EU, the UK have limited control so in this case
\nare being dominated by the EU. For the UK, if the deal is not worse than
\nleaving with no deal it would be rational for the UK to accept it. (Muthoo, and
\nBenita, 2017). <\/p>\n

However, being rational acts as a major limitation which is drawn
\nupon by Fairchild (2016,) who presents the case that as humans are not always
\nrational so are not always unemotional and self-interested individuals who have
\nno regard for others. As stated in Prisoners dilemma, the rational strategy is
\nfor each player in the game to gain the worst outcome possible. However, once
\nempathy is added and individuals are not perceived as rational each player
\ncares more about the others. Consequently, it can transform the game into a win-win
\nsituation for both players creating mutual cooperation. For this game the
\nrelationship amongst nations would improve creating more awareness and hence
\nsofter negotiating approaches with the potential of better deals for both
\nparties.<\/p>\n

Other limitations of game theory are explored by Maneesha, Vijay
\nand Singh (2016) who quoted \u2018we have only considered only two strategies per
\nparty.\u2019p.4. This helps ensure simplicity and makes the whole scenario much
\neasier to understand. Even though there are often many other strategies in
\nplace where more than 2 groups are involved with contrasting ideas. <\/p>\n

Additionally, the pay
\noffs which are the outcomes for each of the possible combinations of actions,
\ncan also be affected for both the EU and UK determined by the course of action
\ntaken and how long it takes for either player to change their mind and move
\nfrom their original plan. If the EU were to swerve first, consequently it would
\nbe a more profitable outcome for the UK and vice versa.<\/p>\n

When one applies an even value system to each successful outcome,
\nBrexit deal negotiations can represent the \u2018chicken game\u2019 which is defined by
\nExton (2016, p.4.),\u2019 If both parties in marital conflict choose escalation to
\nfull conflict in order to get their way (mutual defection) in the game
\nsituation a bad deal offered and hence the deal not accepted, this may be very
\nharmful to both parties , so\u00a0trying to reach a compromise (mutual
\ncooperation) for example a good deal which is accepted \u00a0is usually preferable over mutual defection\u2019.<\/p>\n

Each party has the ability to make threats before starting
\nnegotiating, so the more powerful party in this case the EU will intimidate the
\nUK as they are deemed the weaker party in the game. In this situation, they
\nwould present them with a bad deal, for example implementing a cost to
\ncultivate their access to the single market, in recent speculation a cost of
\n\u00a350 billion has the potential to be enforced.<\/p>\n

In conclusion, it is predicted the UK will achieve less of their
\nobjectives during the recent Brexit negotiations. Through the use of game theory,
\nit is attempted to prove that the UK will receive a worse deal than the EU. By
\nassigning values to each strategy it is possible to create a pay off matrix
\nshowing all options available. Based on my findings I can conclude, that the UK
\nshould accept any deal given to them from the EU, however, the EU are dominant
\nin this game, so it is likely that any deals will be unfavourable for the UK.<\/p>\n

References<\/h2>\n