Game theory represents another principal strand in microeconomic analysis. The preceding US-China tariff conflict lends itself readily to such frameworks given its quantifiable outcomes. The country-by-country negotiation strategy employed by US eliminates multi-player complexity, though dynamic considerations and threat credibility remain paramount.
Market commentary often invokes game-theoretic models that appear intellectual yet prove analytically useless. The China-US dynamic, by contrast, is elegantly straightforward: each round sees America initiate and China respond, with both parties choosing either to impose/retaliate or abstain. The decision tree terminates when neither party escalates, where xix_{i} xi denotes tariff-related gains or losses at each juncture.
