477e1330465038o8412A post on 538.com reports 55,000 people tried to practice international trade by playing a virtual trade game and many wound up starting a host of trade wars- puzzling given game theory’s prediction they should have cooperated better over time. What happened?

The short answer: Trust Problems driven by self-seeking. A curious feature of the game: no ability to introduce controls and assurances- or as I call them, Trust Mechanisms. In real life we have many- the World Trade Organization, the EU, NAFTA, the General Agreement on Tarriffs and Trade, the US Constitution, and so on- deals with a variety of soft and moderate assurances, from formalized commissions to courts of arbitration to sanctions and so on. As in business deals, so in trade: an array of Trust Mechanisms is often crucial to cooperation. Some are now under attack. Others have been scrapped, like the Trans Pacific Partnership (TPP). Others are coming online- such as the 16-nation trade deal being negotiated under China’s leadership in place of TPP without the US. You can read about the 55,000 results and play the game yourself at these two links: We Let Our Readers Practice International Trade. They Started a Bunch of Trade Wars. and How to Win a Trade War.