Planet Money The U.S.-China trade war, according to game theory
285 snips
May 30, 2025 The podcast takes a fascinating dive into the U.S.-China trade war through the lens of game theory. It explores whether the conflict resembles a game of chicken or the prisoner's dilemma. Listeners will uncover who is playing their cards right and the consequences of misjudgments. The discussion also highlights the power dynamics at play and how cooperation could lead to better outcomes. Along the way, intriguing insights into tariffs and past strategies shed light on this high-stakes economic showdown.
AI Snips
Chapters
Transcript
Episode notes
Game Theory Explains Trade War
- The U.S.-China trade war is complex and hard to understand without game theory.
- Game theory considers how strategies change based on others' expected actions and incentives.
Ultimatum Game Example
- Amanda offers Keith $1 out of $100 in an ultimatum game example.
- Keith accepts $1, illustrating the rational equilibrium where the responder takes even a small offer.
Trade War Isn’t Ultimatum Game
- The trade war is not a simple ultimatum game since China retaliated rather than just accepting terms.
- China’s ability to fight back means the U.S.’s take-it-or-leave-it strategy doesn’t fit the reality.