Our new paper examining the dynamics of an asymmetric Hawk-Dove game was published in *The International Journal of Differential Equations*:

# Tag: Economics

## Optimal Strategies for the Clinton/Trump Debate

Consider modelling the Clinton/Trump debate via a static game in which each candidate can choose between two strategies: , where denotes predominantly “attacking” the other candidate, while denotes predominantly discussing policy positions.

Further, let us consider the mixed strategies for Clinton, and for Trump. That is, Clinton predominantly attacks Trump with probability , and Trump predominantly attacks Clinton with probability .

Let us first deal with the general case of arbitrary payoffs, thus, generating the following payoff matrix:

That is, if Clinton attacks Trump and Trump attacks Clinton, the payoff to Clinton is , while the payoff to Trump is . If Clinton attacks Trump, and Trump ignores and discusses policy positions instead, the payoff to Clinton is , while the payoff to trump is . If Clinton discusses policy positions while Trump attacks, the payoff to Clinton is , while the payoff to Trump is , and if both candidates discuss policy positions instead of attacking each other, the payoff to them both will be and respectively.

With this information in hand, we can calculate the payoff to Clinton as:

while the payoff to Trump is:

With these payoff functions, we can compute each candidate’s **best response** to the other candidate by solving the following equations:

where indicates the best response strategy to a fixed strategy for the other player.

Solving these equations, we obtain the following:

If

then,

Clinton’s best response is to choose .

If

then,

Clinton’s best response is to choose .

Otherwise, her best response is to choose .

While for Trump, the best responses are computed as follows:

If

Trump’s best response is to choose .

If

Trump’s best response is to choose .

Otherwise, Trump’s best response is to choose .

**To demonstrate this, let us work out an example. Assume (for this example) that the payoffs for each candidate are to sway independent voters / voters that have not made up their minds. Further, let us assume that these voters are more interested in policy positions, and will take attacks negatively. Obviously, this is not necessarily true, and we have solved the general case above. We are just using the following payoff matrix for demonstration purposes:**

Using the above equations, we see that if , Clinton’s best response is to choose . While, if , Trump’s best response is to choose . That is, no matter what Trump’s strategy is, it is always Clinton’s best response to discuss policy positions. No matter what Clinton’s strategy is, it is always Trump’s best response to discuss policy positions as well. The two candidates’ payoff functions take the following form:

What this shows for example is that there is a Nash equilibrium of:

.

The expected payoffs for each candidate are evidently

.

**Let us work out an another example. This time, assume that if Clinton attacks Trump, she receives a payoff of , while if Trump attacks Clinton, he receives a payoff of . While, if Clinton discusses policy, while being attacked by Trump, she receives a payoff of , while Trump receives a payoff of . On the other hand, if Trump discusses policy while being attacked by Clinton, he receives a payoff , while Clinton receives a payoff of . If Clinton discusses policy, while Trump discusses policy, she receives a payoff of , while Trump receives a payoff of . The payoff matrix is evidently:**

In this case, if , then Clinton’s best response is to choose . While, if , then Trump’s best response is to choose . The Nash equilibrium is evidently

.

The expected payoffs for each candidate are evidently

.

In this example, even though it is the optimal strategy for each candidate to play a mixed strategy of 50% attack, 50% discuss policy, Clinton is expected to benefit, while Trump is expected to lose.

Let us also consider an example of where the audience is biased towards Trump. So, every time Trump attacks Clinton, he gains an additional point. Every time Trump discusses policy, while Clinton does the same he gains an additional point. While, if Clinton attacks while Trump discusses policy positions, she will lose a point, and he gains a point. Such a payoff matrix can be given by:

Solving the equations above, we find that if , Clinton’s best response is to choose . If , Clinton’s best response is to choose . Otherwise, her best response is to choose . On the other hand, if , Trump’s best response is to choose . While, if , Trump’s best response is to choose . Evidently, there is a single Nash equilibrium (as long as ):

.

Therefore, in this situation, it is each candidate’s best strategy to attack one another. It is interesting that even in an audience that is heavily biased towards Trump, Clinton’s best strategy is still to attack 100% of the time.

The interested reader is invited to experiment with different scenarios using the general results derived above.

## Some Thoughts on The US GDP

Here are some thoughts on the US GDP based on some data I’ve been looking at recently, mostly motivated by some Donald Trump supporters that have been criticizing President Obama’s record on the GDP and the economy.

First, analyzing the real GDP’s *average growth per year, *we obtain that (based on a least squares regression analysis)

According to these calculations, President Clinton’s economic policies led to the best average GDP growth rate at $436 Billion / year. President Reagan and President Obama have almost identical average GDP growth rates in the neighbourhood of $320 Billion / year. However, an obvious caveat is that President Obama’s GDP record is still missing two years of data, so I will need to revisit these calculations in two years! Also, it should be noted that, historically, the US GDP has grown at an average of about $184 Billion / year.

The second point I wanted to address is several Trump supporters who keep comparing the average real GDP annual percentage change between President Reagan and President Obama. Although they are citing the averages, they are **not** mentioning the standard deviations! Computing these we find that:

Looking at these calculations, we find that Presidents Clinton and Obama had the most **stable **growth in year-to-year real GDP %. Presidents Bush and Reagan had highly **unstable **GDP growth, with President Bush’s being far worse than President Reagan’s. Further, Trump supporters and most Republicans seem quick to point out the mean of 3.637% figure associated with President Reagan, but the point is this is +/- 2.55%, which indicates high volatility in the GDP under President Reagan, which has not been the case under President Obama.

Another observation I would like to point out is that very few people have been mentioning the fact that the annual real US GDP % is in fact correlated to that of other countries. Based on data from the World Bank, one can compute the following correlations:

One sees that the correlation between the annual growth % of the US real GDP and Canada is 0.826, while for Estonia and The UK is roughly close to 0.7. Therefore, evidently, any President that claims that his policies will increase the GDP, is not being truthful, since, it is quite likely that these numbers also depend on those for other countries, which, I am not entirely convinced a US President has complete control over!

My final observation is with respect to the quarterly GDP numbers. There are some articles that I have seen in recent days in addition to several television segments in which Trump supporters are continuously citing how better Reagan’s quarterly GDP numbers were compared to Obama’s. We now show that in actuality this is not the case.

The problem is that most of the “analysts” are just looking at the raw data, which on its face value actually doesn’t tell you much, since, as expected, fluctuates. Below, we analyze the quarterly GDP% data during the tenure of both Presidents Reagan and Obama, from 1982-1988 and 2010-2016 respectively, comparing data from the same length of time.

For Reagan, we obtain:

The only way to reasonably compare these two data sets is to analyze the rate at which the GDP % has increased in time. Since the data is nonlinear in time, this means we must calculate the derivatives at instants of time / each quarter. We first performed cubic spline interpolation to fit curves to these data sets, which gave extremely good results:

We then numerically computed the derivative of these curves at each quarter and obtained:

The dashed curves in the above plot are plots of the derivatives of each curve at each quarter. In terms of numbers, these were found to be:

Summarizing the table above in graphical format, we obtain:

As can be calculated easily, Obama has higher GDP quarterly growth numbers for 15/26 (57.69%) quarters. Therefore, even looking at the quarterly real GDP numbers, overall, President Obama outperforms President Reagan.

Thanks to Hargun Singh Kohli, B.A. Honours, LL.B. for the data collection and processing part of this analysis.