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A Coalition-Formation Approach to Equilibrium Federations and Trading Blocs

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Author Info
Burbidge, John B.
James A. DePater
Gordon M. Meyers
Abhijit Sengupta

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Abstract

The authors develop a model in which states may choose to form coalitions to capture efficiency gains from policy coordination. Joining a coalition entails setting the policy variable to maximize the coalition's aggregate payoff at a Nash equilibrium against nonmembers and to commit to a transfer scheme to share the gains. With two states, the unique equilibrium structure is complete federation; with more than two states, incomplete federation can be the unique equilibrium. Interpreting this result in terms of custom unions, the trend to trading-bloc formation may be equilibrium behavior even with cooperation and transfers within customs unions. Copyright 1997 by American Economic Association.

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Publisher Info
Article provided by American Economic Association in its journal American Economic Review.

Volume (Year): 87 (1997)
Issue (Month): 5 (December)
Pages: 940-56
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Handle: RePEc:aea:aecrev:v:87:y:1997:i:5:p:940-56

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Martin J. Osborne & Ariel Rubinstein, 1994. "A Course in Game Theory," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262650401.
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  2. Casella, Alessandra, 1992. "Participation in a Currency Union," American Economic Review, American Economic Association, vol. 82(4), pages 847-63, September. [Downloadable!] (restricted)
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  3. Hart, Sergiu & Kurz, Mordecai, 1983. "Endogenous Formation of Coalitions," Econometrica, Econometric Society, vol. 51(4), pages 1047-64, July. [Downloadable!] (restricted)
  4. Sang-Seung, Yi, 1996. "Endogenous formation of customs unions under imperfect competition: open regionalism is good," Journal of International Economics, Elsevier, vol. 41(1-2), pages 153-177, August. [Downloadable!] (restricted)
  5. Kyle Bagwell & Robert Staiger, 1994. "Multilateral Tariff Cooperation During the Formation of Regional Free Trade Areas," International Trade 9410001, EconWPA. [Downloadable!]
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  6. Wildasin, David E. & Douglas Wilson, John, 1991. "Theoretical issues in local public economics : An overview," Regional Science and Urban Economics, Elsevier, vol. 21(3), pages 317-331, November. [Downloadable!] (restricted)
  7. Bernheim, B. Douglas & Peleg, Bezalel & Whinston, Michael D., 1987. "Coalition-Proof Nash Equilibria I. Concepts," Journal of Economic Theory, Elsevier, vol. 42(1), pages 1-12, June. [Downloadable!] (restricted)
  8. Kemp, Murray C. & Wan, Henry Jr., 1976. "An elementary proposition concerning the formation of customs unions," Journal of International Economics, Elsevier, vol. 6(1), pages 95-97, February. [Downloadable!] (restricted)
  9. Ray, D. & Vohra, R., 1993. "Equilibrium Binding Agreements," Papers 21, Boston University - Department of Economics.
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Bard Harstad, 2006. "Flexible Integration," Discussion Papers 1428, Northwestern University, Center for Mathematical Studies in Economics and Management Science. [Downloadable!]
  2. Macho-Stadler & Licun Xue, 2006. "Winners And Losers From The Gradual Formation Of Trading Blocs," Departmental Working Papers 2006-27, McGill University, Department of Economics. [Downloadable!]
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  3. Nicolas Marceau & Gordon M. Myers, 2000. "From Foraging to Agriculture," Discussion Papers dp00-07, Department of Economics, Simon Fraser University, revised Feb 2000. [Downloadable!]
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  4. John Burbidge & Katherine Cuff & John Leach, 2004. "Capital Tax Competition with Heterogeneous Firms and Agglomeration Effects," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
  5. Paul Frijters & Alexander F. Tieman, 1999. "The Role and Evolution of Central Authorities," Tinbergen Institute Discussion Papers 99-053/1, Tinbergen Institute. [Downloadable!]
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  6. Daniel Laskar, 1998. "Coopération monétaire partielle," Annales d'Economie et de Statistique, ADRES, issue 52, pages 05, Octobre-D. [Downloadable!]
  7. Hyejoon Im, 2004. "Trading Blocs and Foreign Direct Investment: Endogenous Coalition Structure," Econometric Society 2004 Far Eastern Meetings 532, Econometric Society. [Downloadable!]
  8. Sebastian Krautheim & Tim Schmidt-Eisenlohr, 2009. "Heterogeneous Firms, 'Profit Shifting' FDI and International Tax Competition," Economics Working Papers ECO2009/15, European University Institute. [Downloadable!]
  9. Nicolas Marceau & Gordon Myers, 2005. "On the Early Holocene: Foraging to Early Agriculture," Cahiers de recherche 0502, CIRPEE. [Downloadable!]
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  10. Kubota, Keiko, 2000. "Trade negotiations in the presence of network externalities," Policy Research Working Paper Series 2317, The World Bank. [Downloadable!]
  11. Philippe Aghion & Pol Antràs & Elhanan Helpman, 2004. "Negotiating Free Trade," NBER Working Papers 10721, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  12. John Burbidge & Katherine Cuff, 2002. "Capital Tax Competition and Returns to Scale," Department of Economics Working Papers 2002-10, McMaster University. [Downloadable!]
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  13. John Whalley, 2005. "Globalization and Values," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
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  14. John Burbidge & Katherine Cuff & John Leach, 2005. "Tax Competition with Heterogeneous Firms," Working Papers 05001, University of Waterloo, Department of Economics, revised Jan 2005. [Downloadable!]
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  15. Itai Agur, 2007. "The US Trade Deficit, the Decline of the WTO and the Rise of Regionalism," Economics Working Papers ECO2007/17, European University Institute. [Downloadable!]
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  16. John B. Burbidge & Gordon M. Myers, 2000. "Tariff Wars and Trade Deals with Costly Government," Department of Economics Working Papers 2000-05, McMaster University. [Downloadable!]
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  17. Paola Conconi & Carlo Perroni, 2001. "Issue Linkage and Issue Tie-in in Multilateral Negotiations," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
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  18. Abdalla Mansour & Nicolas Marceau & Steeve Mongrain, 2001. "Gangs and Crime Deterrence," Cahiers de recherche CREFE / CREFE Working Papers 138, CREFE, Université du Québec à Montréal. [Downloadable!]
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