In the iconic, one-shot, Prisoners' Dilemma game, the logical Nash Equilibrium outcome for the players, who are both incentivized by the game structure to play "beggar-thy-neighbor strategies" and improve their own outcome at the expense of the opponent, is a non-cooperative solution, that is actually worse for either party than the cooperative agreed alternative. In the Brexit game context the same Nash Equilibrium outcome arguably corresponded to a No Deal Brexit solution, instead of a cooperative "quid-pro-quo" compromise trade deal between the United Kingdom (UK) and European Union (EU). An additional massive exacerbating factor (often conveniently overlooked in the UK but not EU analysis) is the huge natural asymmetry between the Brexit parties. The GDP of the EU is c.6 times larger than the UK's and correspondingly the GDP of the UK c.6 times smaller than the EU's. There are currently 27 separate member countries in the EU, so assuming roughly balanced trade between the UK and EU overall, the average absolute trade impact value of a No Deal Brexit on an average EU country would be less than 4% of the reverse impact on the UK. Similarly, the average proportional trade impact value of a No Deal Brexit on an average EU country would be less than 1% of the reverse impact on the UK. Moreover because of different country sizes and geography, some EU countries would suffer trade impacts above these average figures and some below them, and so there would be many EU countries, whose votes would still be needed for a Brexit Trade Deal, for whom a No Deal Brexit would be actually economically irrelevant. Additionally there would also be an incentivizing "silver lining" for some EU countries from a No Deal Brexit, if they could substitute i) lost trade to the EU from the UK with ii) replacement trade from their own countries to the rest of the EU. So for example a No Deal Brexit would surely allow the substitution of much hugely valuable financial and insurance services and legal trade from the City of London to European commercial hubs of Paris, Dublin and Frankfurt. This factor becomes even more valuable and important if EU markets could subsequently also be foreclosed to the UK in future due to diverging standards and other lock-in effects. There are also reputational benefits to the EU from showing that it can maintain a tough line. Against this background, one could argue that a final No Deal Brexit outcome would look near inevitable to the bargaining parties, if they both adopted a tough, "hard-ball" bargaining approach. Unless of course the real underlying game was of political "chicken" and each side believed that other party would "veer off the road" and concede at the last minute. However even if the chicken game model had been appropriate in the past, the political cost for key politicians on either side conceding key terms e.g. on fisheries to avoid a No Deal Brexit in late 2020, looked so high as to make this strategy unlikely and quite implausible. Why then would both parties, the UK and EU, go through the motions of leaving no stone unturned and negotiating until the final deadline, as though trying to avoid No Deal Brexit, if they knew that their own policies made this all but inevitable? One explanation could be pure negotiating momentum and political convenience. Another explanation is that both the EU and UK just wanted to be able to portray themselves as the "good guy" who negotiated in good faith right up to the final whistle to avoid No Deal Brexit, with other party as the "bad guy", who "pulled the plug prematurely and scuppered a deal". Another argument, which now looks decisive, could be the "outside option" value, where something miraculous might just turn up in the remaining time window, despite the "time decay" factor. This was arguably the backdrop and direction of travel in late 2020 when an additional game theory element came decisively into play. In a hypothetical "game against nature", the rational opponent has to implement a strategy against an unknown opponent playing an a priori unknown and unknowable strategy. This was almost literally true in 2020, when both the UK and EU also faced an additional hypothetical opponent i.e. nature itself, playing its Covid pandemic strategy, adding an extra critical destabilizing random element to their basic Brexit Deal or No Deal game.Thus in late December 2020, just as the Brexit deadline approached, a much more virulent British version of the Covid virus suddenly appeared and was discovered in the UK. This immediately led to the reactive imposition of restrictions by 3rd countries on travel to and from the UK, including travel to and from France via the Channel Tunnel. This in turn led to a huge blockage of thousands of parked freight lorries around Dover, with their angry European drivers unable to get home to their families for Christmas and vice versa, providing a perfect pre-Brexit simulation all across BBC News, of what chaos a No Deal Brexit could immediately and imminently bring to the UK.Arguably it was this sudden increased perceived UK cost of a No Deal Brexit and increased UK opportunity cost if it had to focus on an extreme No Deal Brexit shock rather than fighting the new British-variant Covid (including with emergency vaccines imported from Europe), plus the political bonus of delivering the promised "oven-ready" trade deal rather like an oven-ready British turkey for Christmas, that ultimately created the final tipping point, causing the UK government's political cost-benefit analysis and optimal political strategy to suddenly swing over in late December from No Deal to Deal. In the process, this seemed to confirm 3 favorite UK political truisms that "a week is a long time in politics" and that everything can turn on Macmillan's famously understated political factor of: "events, dear boy" and that the EU indeed "never agrees a deal until the last minute."
