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Berthold Busch / Matthias Diermeier / Henry Goecke / Michael Hüther IW-Policy Paper No. 18 22. December 2016 Brexit and Europe’s Future: A Game Theoretical Approach

After the UK referendum of last summer, the new institutional relationship between the UK and the EU has to be shaped. The question arises as to how relations should be conducted going forward.

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A Game Theoretical Approach
Berthold Busch / Matthias Diermeier / Henry Goecke / Michael Hüther IW-Policy Paper No. 18 22. December 2016

Brexit and Europe’s Future: A Game Theoretical Approach

IW policy paper

German Economic Institute (IW) German Economic Institute (IW)

After the UK referendum of last summer, the new institutional relationship between the UK and the EU has to be shaped. The question arises as to how relations should be conducted going forward.

For the two bargaining parties, the UK and the EU as a whole, the question now is what long and short-term advantages can be obtained, and therefore, which negotiation strategy to pick.

We examine these questions from a game theoretical perspective. Four alternative outcomes (World Trade Organisation; Cherry picking; Norway; Norway+) are analyzed from an economic perspective, both in the long and in the short run. The evaluation is based on the specific characteristic of each outcome with respect to the access to the European single market, free movement of persons, and payments to the EU.

This game theoretical approach yields that the EU – no matter what is economically feasible in the short-run – has to play a tough negotiation strategy if they care about the long-run. The result is not a question of punishment but of pure economic rationale.

Download PDF
A Game Theoretical Approach
Berthold Busch / Matthias Diermeier / Henry Goecke / Michael Hüther IW-Policy Paper No. 18 22. December 2016

Berthold Busch / Matthias Diermeier / Henry Goecke / Michael Hüther: Brexit and Europe’s Future – a Game Theoretical Approach

IW policy paper

German Economic Institute (IW) German Economic Institute (IW)

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Institutional consequences of EU Enlargement
Berthold Busch / Julian Sommer / Samina Sultan IW-Report No. 15 12. March 2024

Institutional consequences of EU Enlargement

At the latest since the Russian war of aggression in Ukraine and the decision to open accession talks with the country, the topic of enlargement has once again become much more important for the European Union (EU).

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Berthold Busch / Samina Sultan IW-Report No. 63 11. December 2023

Fiscal aspects of an EU-enlargement

Following the European Commission's recommendation to open accession negotiations with Ukraine, the European Council will decide on this at its summit in December. This is a historic step that is of great geostrategic importance, particularly in light of the ...

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