http://feedproxy.google.com/~r/zerohedge/feed/~3/IZlSQMxI1nw/italy-it-game-theory-over

For Italy, It Is Game Theory Over

Submitted by Tyler Durden on 07/27/2012

We discussed the use of Game Theory as a useful tool for analyzing Europe’s predicament in February and noted that it was far from optimal for any (peripheral or core) sovereign to pre-emptively ‘agree’ to austerity or Eurobonds respectively (even though that would make both better off). This Prisoner’s Dilemma left the ugly Nash-Equilibrium game swinging from a catastrophic break-up to a long, painful (and volatile) continuation of the crisis. Recent work by BofAML’s FX team takes this a step further….”