http://gametheory101.com/courses/international-relations-101/
Why do states engage in trade? One reason might be because some states are just better at producing goods than other states. This lecture uses the California wine and Mexican tequila industries as an example. California has a good climate for grapes; Mexico has a good climate for agave (the plant that tequila is made from). Naturally, it makes sense for California to make wine and Mexico to make tequila.
But is trade still viable when there aren't the obvious advantages? The answer is yes, and we will look at that case in the next video.
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