A SUPERGAME STRATEGY OF TRADE - THE CASE OF SOUTH AND NORTH-KOREA

Utilizing a multi-period cooperative game model, we propose an optimal strategy of trade between the market economy of South Korea and the centrally-planned economy of North Korea. In the unique context of the Korean situation, i.e. two Koreas' announced goal of eventual reunification, we define a total welfare loss function and find an optimal strategy for inter-Korea trade that should minimize total welfare losses for the Korean peninsula as a whole.