Strategic Trade Protection Under Incomplete Information: A Bayesian Learning Approach to Tariff Wars

Erik Contreras
Additional contact information
Erik Contreras: Facultad Latinoamericana de Ciencias Mexico

Sobre México. Revista de Economía, 2025, vol. 1, issue 12, 103-145

Abstract: This research pioneers a revolutionary synthesis between Bayesian game theory and deep reinforcement learning to decode the dynamics of strategic trade policy under incomplete information. We introduce the Logit-Quantal Response Equilibrium Bayesian (LQREB) framework—a novel computational architecture that bridges the theoretical elegance of game-theoretic equilibria with the adaptive power of neural networks. Through 10 000 simulated episodes modeling U.S.-Mexico-Canada trade interactions, the framework reveals emergent patterns of moderation: aggressive protectionist players (U.S.) converge to moderate tariffs (10%) when facing credible retaliation threats, vulnerable partners (Mexico) adopt passive strategies (97% non-retaliation), while strong partners (Canada) maintain firm responses (99% with 25% retaliation). The LQREB’S unique contribution lies in its ability to capture bounded rationality through temperature-controlled softmax (λ=20) while preserving Bayesian belief updating, achieving convergence where traditional Perfect Bayesian Equilibrium methods fail computationally. This work establishes the first scalable and falsifiable framework for analyzing multi-agent strategic protection under radical uncertainty.

JEL-codes: C72 F13 (search for similar items in EconPapers)
Date: 2025
References: View complete reference list from CitEc
Citations:

Downloads: (external link)
https://sobremexico-revista.ibero.mx/index.php/Rev ... ico/article/view/185 First version, 2025 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:smx:journl:12:103:145

Access Statistics for this article

Sobre México. Revista de Economía is currently edited by Isidro Soloaga and Alejandro Rodríguez Arana

More articles in Sobre México. Revista de Economía from Sobre México. Temas en economía
Bibliographic data for series maintained by Maria Alejandra Villegas Gutierrez ().