Though This Be Madness: A Game-Theoretic Perspective on the Brexit Negotiations

37 Pages Posted: 28 Sep 2017 Last revised: 21 Feb 2018

See all articles by Soeren C. Schwuchow

Soeren C. Schwuchow

Brandenburg University of Technology

Athanassios Pitsoulis

University of Hildesheim

Date Written: February 21, 2018

Abstract

On June 19, 2017 the European Union and the British government officially commenced negotiations on the terms of the British exit from the union. The dominant view among most economic policy analysts and commentators seems to be that the cards are clearly stacked against Britain and that the high-handed behaviour of the British representatives is, at best, either a bluff or, at worst, a sign of a loss of reality. In this paper we develop a formal model to show how this uncertainty regarding the preferences and strategy of the British side may affect the dynamic of the negotiations and may lead to unanticipated outcomes.

Keywords: Brexit, Game Theory, Madman Theory, Trembling-Hand Perfection

JEL Classification: D78, E65, H12

Suggested Citation

Schwuchow, Soeren and Pitsoulis, Athanassios, Though This Be Madness: A Game-Theoretic Perspective on the Brexit Negotiations (February 21, 2018). Available at SSRN: https://ssrn.com/abstract=3000515 or http://dx.doi.org/10.2139/ssrn.3000515

Soeren Schwuchow (Contact Author)

Brandenburg University of Technology ( email )

Platz der Deutschen Einheit 1
Cottbus, 03046
Germany

HOME PAGE: http://scschwuchow.wordpress.com

Athanassios Pitsoulis

University of Hildesheim ( email )

Marienburger Platz 22
Hildesheim, 31141
Germany

HOME PAGE: http://www.uni-hildesheim.de/wiwid/

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