As a market participant today, it is clear to most that the dominant driver of market performance, at least in the short term, is likely to be how the global game of tariffs and threats plays out. What is not clear is (1) What type of game it is (2) How much information participants have about each other’s objectives (3) How much clarity each player has about the other players’ actions and strategies (4) How many rounds of the game will be played, and (5) Are the players going to be time-consistent. In short, the list of things we know is much shorter than the list of things we don’t know.
In game theory, there are two types of canonical games. Simultaneous games are games where each player takes an action only maximizing their own payoff while acting at the same time. Sequential games are games where each player takes turns.
The full note on this important topic can be downloaded at this link: LTA Thinking – Games Countries Play Tariffs, Threats and Tail Risks