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Crimea through a Game-Theory Lens

The phrase “history always repeats itself” is something that is commonly thrown around. However, the only way for us to prevent destructive, historic events from happening again is to truly understand the reasoning as to why they happened in the first place. Recently, the Russian occupation of Crimea proved to be somewhat similar to the Cold War, which has always been very difficult to understand. When economists began to step in and figure it out, they noticed that applying game theory to the situation helped “analyze the strategic logic of threats, credibility, and conflict”.

To begin, after the Soviet Union was broken up, borders were redrawn relatively peacefully, and the entire shift was not as violent as it could have been. Recently, however, arguments seem to lead to bigger conflicts. According to the game theory perspective, there are multiple equilibriums in the case of conflict; one is that there is a peaceful resolution from both parties, and the other is that both parties erupt into an enormous conflict. While the first option of course seems much better, if one side begins to break out into conflict, the other will have to respond in the same way, so that they do not get entirely obliterated.

Another aspect of game theory that comes into play here is how the United States fits into this entire situation. Originally, America had a pact to protect Ukraine, but this pact was apparently not very credible. If America chooses to help Ukraine, this would put her in much more danger, but also show America as a relatively selfless country. On the other hand, if they chose not to help Ukraine, while it would not shift the world’s views of America’s commitments too much, it would cause other countries to doubt her dedication, which could have detrimental payoffs. Regardless, Russia will most likely not hand back Crimea, so it will be very interesting to see how the United States chooses to act in this situation, and to see how the situation progresses.

http://www.nytimes.com/2014/03/16/business/crimea-through-a-game-theory-lens.html?_r=0

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