The Political Economy of Trade (International Economics) (Essay Sample)

The Prisoner`s Dilemma The prisoner`s dilemma, in the context of international trade, refers to a problem characterized by two countries that may benefit individually, by compromising the well being of the other. However, if both countries reached an agreement to compromise a certain bit, then both would benefit by more than when they had not agreed to do so (Krugman & Obstfeld, 2008). Let us consider an example of China and Mexico as the only two countries that can produce steel in the global market. Let us also assume that producing steel will be considered beneficial by both countries for their trade balance. Therefore, no matter what C...