Instead of learning more about the private credit sector, I decided to concentrate on my (simple) game theoretical model on nuclear exchange between Iran and Israel during my Easter break. In the first part, which is now free to read, I introduced the starting assumptions of the game. They included the following:
Israel, most likely, holds a considerable nuclear arsenal and means to deliver it to Iran.
Iran holds the capacity to strike critical infrastructure targets in Israel with devastating force.
I will now expand these assumptions and thus the model to cover two scenarios. The default scenario is what I described in the first part:
What I did, and what I will present to you in Part II, was that I assumed that in a nuclear exchange, Israel can deliver a more devastating first strike when it comes to civilian casualties. In other words, Israel can (presumably) strike Tehran and other major Iranian cities with strategic (high-yield, high-fallout) thermonuclear weapons, annihilating a considerable share of the Iranian populace in an instant.
However, it is unlikely to the point of impossibility that Israel, even with the help of the U.S., could decimate all of Iran’s missile launch capabilities. Remember that Iran only needs about a dozen Khorramshahr 4 hypersonic missiles with 1800 kg warheads to end Israel by striking the desalination plants and the Dimona reactor. This implies that A) Israel is unlikely to seek maximum casualties and B) the game is likely to have steps, or actions, which include the devastating strikes to the vulnerabilities of Israel by Iran.
I call this the “default scenario,” because this is the general assumption, that is, that Israel has (a lot of) nukes, while Iran currently has none (but is close). What I will now present to you is a (simplified) mathematical framework, which shows that in such a setup, the outcome of the game is crucially dependent on the initial (starting) conditions of the nuclear exchange. The second scenario models what happens, in a game-theoretical sense, when the capabilities (initial conditions) of Iran grow.
Before we begin, I want to remind you that this is just a (simplified) mathematical model, whose only purpose is to present the (mathematical) trajectory of a nuclear conflict between the two nations. It should not be taken as a “real-life” description (forecast) of how the exchange would go, but as a presentation of conditions that are likely to determine the outcome of the exchange.
The setup of the game
The setup of the game is as follows.
