As sanctions were lifted this past weekend following Iran’s implementation of the nuclear agreement with world powers, President Hassan Rouhaniagain called for Iran to rely less on the sale of oil and to reform the economy. But according to an analysis of Iranian politics based on game theory, economic reform is unlikely during the rest of his first presidential term, which ends in 2017.
Using the principles of game-theory, I evaluated the calculations and likely decisions of the main factions within Iran and determined the likely direction Iranis headed. Game theory is a subfield of micro-economics focused on the mathematical study of conflict and cooperation between decision-makers. Outcomes are determined by calculating the payoffs stakeholders incur for supporting or opposing differing economic policies.
I estimated the payoffs of the factions in Iran by ranking their known preferences over economic liberalisation, regional posture and domestic security. I calculated the range of combinations for these to estimate the degree to which the supreme leader, Ayatollah Ali Khamenei, and hardline factions would support or oppose Rouhani’s agenda of economic reform.
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