Iran’s Threat to Block Hormuz: a Game Theory Analysis

Game theory was developed in the wake of World War 2 to assist policymakers in analysing interdependent decision-making, which arises when what you want to do depends upon what others want to do, most notably in situations relating to conflict over resources – the alternative is decision theory, where your decision is independent of others’ choices; for example, deciding whether you want to invest in the stock market or bonds for your retirement. Applying game theory to Iran’s recent threat to block the Strait of Hormuz reveals that Iran is highly unlikely to do so, as the move does not serve the Islamic Republic’s interests.

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