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game theory, Brexit, trade wars, US-China Trade War
Politics and Economics have a very intricate relationship, especially because every world decision ever was taken has been if not entirely, but primarily because of economic concern. Game Theory has been used as a basis of determining the best possible outcomes in times of trade as well as war, it has been used theoretically by Busch, Diermeier, Goecke and Hüther, 2016, to explain the conditions of the Brexit Trade War. In order to continue, at first it is very important to understand the main areas the countries in question exports and imports from, what are the main goods or products in question and what conditions affect this trade. Using an ordered-probit model, we can identify the important aspects we need to work with that effect on the highest end, the country’s GDP (owing to export-import changes) and consecutively the changes in appreciation or depreciation of their currency or on a larger scale, their economy. Secondly, using game theory, the best decisions shall be to minimize the negative effects and to bring forward negotiations, policies and to intuitively as well as mathematically predict how the economy shall change and how to combat that change. Taking various factors into consideration and with the given two-part methodology, it will show how trade is affected accumulatively due to this. As a mathematical method, it shall allow for diplomacy, cooperation, and strategic modeling by assuming that the players or countries are rational decision-makers.