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Myopic or farsighted: bilateral trade agreements among three symmetric countries

Author

Listed:
  • Yujiro Kawasaki

    (Kyoto University of Advanced Science)

  • Kenmei Tsubota

    (Institute of Developing Economies - Japan External Trade Organization)

Abstract

We examine network formation through bilateral trade agreements (BTA) among three symmetric countries. Each government decides whether to form a link or not via a BTA depending on the differential of the ex-post and ex-ante sum of real wages in the country. Setting the governmental decision in two forms, myopic and farsighted, we analyze the resulting network formation. Firstly, we find that both myopic and farsighted games achieve complete networks. Secondly, networks resulting from myopic games coincide with those resulting from farsighted games.

Suggested Citation

  • Yujiro Kawasaki & Kenmei Tsubota, 2019. "Myopic or farsighted: bilateral trade agreements among three symmetric countries," Letters in Spatial and Resource Sciences, Springer, vol. 12(3), pages 233-256, December.
    • Handle: RePEc:spr:lsprsc:v:12:y:2019:i:3:d:10.1007_s12076-019-00239-9
    DOI: 10.1007/s12076-019-00239-9
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    More about this item

    Keywords

    Endogenous network formation; Bilateral trade agreement; Myopic and farsighted behaviors;
    All these keywords.

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F15 - International Economics - - Trade - - - Economic Integration

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