A game-theory explanation of the paradox that even though all countries would benefit if each chose free trade, in fact each tends to follow protectionist policies is

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The paradox described in the question is best explained by the prisoner's dilemma, which is a classic game-theory scenario where two actors (in this case, countries) both have two options (free trade or protectionism) and must make a decision without knowing what the other actor will choose. The dilemma arises because even though both actors would benefit if they both choose free trade, each has an incentive to choose protectionism based on the assumption that the other actor will choose the same. This results in a sub-optimal outcome for both, as neither country is able to enjoy the maximum benefits of free trade.

A Game-Theory Explanation of the Paradox That Even Though All