The evolution of free trade networks
AbstractThis paper considers the evolutionary dynamics of a free trade agreement (FTA) network formation game among N countries. We first explore the static model introduced by Goyal and Joshi (2006) and precisely characterize the set of pairwise stable FTA networks. Then, we develop a dynamic model under random perturbations and identify long-run outcomes to remove prediction uncertainty inherited from static analysis. The results show that both partial free trade and global free trade will result when there are only three countries. However, when more countries are involved, only the complete FTA network emerges.
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Bibliographic InfoArticle provided by Elsevier in its journal Journal of Economic Dynamics and Control.
Volume (Year): 38 (2014)
Issue (Month): C ()
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Web page: http://www.elsevier.com/locate/jedc
Free trade agreements; Global free trade; Network formation game; Stochastic stability analysis;
Find related papers by JEL classification:
- C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
- F15 - International Economics - - Trade - - - Economic Integration
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