Two-Stage Games of Complete but Imperfect Information : Application in International Trade with Tariff

Trade relationships are very complicated especially given the battles between Keynesian and Neo-liberal economic views on the issue. Game theory and its application in international trade can provide a simplistic but important method for quantifying the benefits of trading. In this paper, we intend to use two-stage games of complete but imperfect information in the trading context among two and three countries and compare it with the non-trading country. The purpose of this work is to apply a two-level game model of complete but incomplete information in game theory and apply it to international economics in the context of customs trading. The basic literature for this work is “Game Theory for Applied Economists” by Robert Gibbons. Glenn W. Harrison and E. E. Rustrom on Trade War, Trade Negotiation, and Applied Game Theory. We provide mathematical models and eventually provide the interpretation in a broader context