Strategic Partnership of Independent States as a Game

The Institute of Technology and Business, School of Expertness and Valuation, Okržzní 517/10, 37001 České Budějovice, Czech Republic

^* Corresponding author: haskovas@post.cz

Abstract

The paper analyses the basic strategies of the international trade of two countries, analogous to the strategies of the market behaviour of two companies in the duopoly. The two-stage methodological approach was applied to analyse a problem. The first stage includes the formulation of an analytical tool in the form of an international trade model based on the model of comparative advantage whose outputs are transformed into the language of the game theory apparatus and presented by a payoff matrix. Based on the payoff matrix, the relevant analyses are then performed in the second stage. In analogy with market reality, two elementary game strategies were analysed – the strategy of cooperation and the myopic strategy. It has been shown that the cooperation based on the „cartel” model of two firms is to a certain extent an adequate description of the behaviour model of two co-trading countries provided that the input assumptions of game theory are not significantly violated. The article explains why the „foreign trade cartel” is economically beneficial to all citizens of the trading countries unlike the cartel of companies operating within the same market, where the companies take key advantage from cooperation at the expense of consumer welfare.