Game Theory For No Deal Brexit
https://www.bloomberg.com/opinion/articles/2019-01-30/theresa-may-s-brexit-gambit-is-a-loser-says-game-theory
By the end of the month, the United Kingdom (UK) and the European Union (EU) have to reach a consensus about the UK leaving the union. Negotiations have failed since the June 2016 referendum and it is now up to Boris Johnson’s British government to come to a conclusion.
As in class, we notice the two opposing parties (the UK and the EU) to be acting rationally and in their own self-interests, giving a prisoner’s dilemma structure. Obviously a cooperative outcome would only happen once one side accepts the other’s proposal. However, at the time the article was written, then prime-minister Theresa May did not want the UK to give up to the EU’s terms and stay in a customs union, avoiding a potential hard border with Ireland should that happen.
Here, we look at the different decisions by the EU and the UK. The dominant strategy is to show the readiness to leave without a deal – which is also currently being used by Boris Johnson as of right now. Currently, the UK is assuming that the payoff is skewed and the EU will win more by cooperating, thereby being pushed to make that decision. The EU, on the other hand, is trying to avoid this game theory dilemma since a favorable leave by the UK may open the doors to different EU members to leave on also better terms. So, their strategy would be a grim one and resort a punitive one, where a defective member state (UK) will be worse off when leaving.
Ultimately, both opponents are currently pushing for a ‘No-Deal’ agreement based on their own wants, but it will soon be confirmed by the Brexit deadline on the 31st of October.