TITLE:
Shapley Value and International Trade
AUTHORS:
Robert A. Agnew
KEYWORDS:
International Trade, Cooperative Game Theory, Shapley Value
JOURNAL NAME:
Theoretical Economics Letters,
Vol.13 No.3,
June
14,
2023
ABSTRACT: International trade is modeled as a
multinational cooperative game where Shapley value leads
to fair distribution of total trade gains. This fair-trade solution entails side payments among trading nations, essentially
international trade adjustment assistance. These Shapley side payments
provide balance to the often
contentious free-trade solution, which is essentially open-door and hands-off.
We develop requisite calculations and illustrate them with a hypothetical
four-nation trade game. We conclude that Shapley fair-trade estimates
and calculations should be an integral part of any international trade
negotiation.