Abstract:

This paper analyses the international trade dynamics between two countries as a two-player, non-zero sum, cooperative game. The reason behind this type of approach is that we consider game theory as an important instrument for the analysis of international trade dynamics. As required by a general equilibrium model, we will try to establish an equilibrium on both labor and capital markets and we will try to determine the labor and capital intensity in both countries as well as the equilibrium level of the wage and rental rate.