Using game theory as an analytical tool, if one large nation imposes tariffs, the total cost is small; however, when several trading partners do the same:
A) the costs are even smaller.
B) the costs balance out and there is no harm.
C) the costs are the same but the potential gains are much smaller.
D) then all nations gain.

Question

Quizplus · Accepted Answer

In game theory, when multiple players impose tariffs, it can create a "prisoner's dilemma" scenario where all players end up worse off than if they had not imposed tariffs. The costs of tariffs for each country may be the same, but the potential gains from trade are much smaller due to reduced trade flows. Therefore, the costs are the same but the potential gains are much smaller.

Using Game Theory as an Analytical Tool, If One Large