Three-country trade relations: a discrete dynamic game approach

A three-country, two-bloc trade model is used to determine the impact of a coalition within the blocs on the optimal pricing policies of the bloc. It is shown in a North-South world where the South has to cooperate for efficient pricing policy. In addition to the complexities of interactions between three countries, a dynamic game approach leads to the usage of numerical methods in this paper. We used a new algorithm based on adaptive search procedure called genetic algorithm to optimize strategies for three-person discrete dynamic games. Welfare implications are also addressed.