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Policy Linkage and Uncertainty in International Agreements

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  • Josh Ederington

Abstract

This article uses noncooperative game theory to analyze the potential benefits of linking trade agreements to agreements covering domestic policies in a world of uncertainty. I show that nonlinkage is more desirable if there is a positive probability that a country will erroneously believe that its trading partner is cheating on the agreement (triggering an unnecessary punishment phase). In contrast, linkage is more desirable if there is a positive probability that cheating will go unnoticed. Copyright 2003, Oxford University Press.

Suggested Citation

  • Josh Ederington, 2003. "Policy Linkage and Uncertainty in International Agreements," Economic Inquiry, Western Economic Association International, vol. 41(2), pages 305-317, April.
    • Handle: RePEc:oup:ecinqu:v:41:y:2003:i:2:p:305-317
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    File URL: http://hdl.handle.net/10.1093/ei/cbg010
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    Cited by:

    1. Richard Chisik & Chuyi Fang, 2024. "Cross-retaliation and International Dispute Settlement," Working Papers 087, Ryerson University, Department of Economics.
    2. Richard Chisik & Harun Onder, 2017. "Does Limited Punishment Limit The Scope For Cross Retaliation?," Economic Inquiry, Western Economic Association International, vol. 55(3), pages 1213-1230, July.
    3. Richard Chisik, 2010. "Limited Incremental Linking and Unlinked Trade Agreements," Working Papers 023, Ryerson University, Department of Economics.
    4. Harstad, Bård & Lancia, Francesco & Russo, Alessia, 2022. "Prices vs. quantities for self-enforcing agreements," Journal of Environmental Economics and Management, Elsevier, vol. 111(C).
    5. Thomas, Charles J. & Willig, Robert D., 2006. "The risk of contagion from multimarket contact," International Journal of Industrial Organization, Elsevier, vol. 24(6), pages 1157-1184, November.
    6. Lee, Gea M., 2007. "Trade agreements with domestic policies as disguised protection," Journal of International Economics, Elsevier, vol. 71(1), pages 241-259, March.
    7. Ngo Van Long & Martin Richardson & Frank Stähler, 2023. "Issue linkage versus ringfencing in international agreements," Scandinavian Journal of Economics, Wiley Blackwell, vol. 125(2), pages 489-516, April.

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