Forbearance in Optimal Multilateral Trade Agreements
AbstractI present a theory of optimal multilateral trade agreements with public political shocks. I first show that "forbearance"-- where one country withholds retaliation when its trading partner receives a shock-- is a feature of an optimal agreement. This provides a rationale for countries not acting on retaliatory rights granted under GATT. Second I show that there is a limit to forbearance allowable in a self-enforcing agreement. This limit is increasing in the number of countries in the agreement, increasing in the common discount factor, and increasing in the size of the export sector.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Stanford University, Graduate School of Business in its series Research Papers with number 2085.
Date of creation: Nov 2011
Date of revision:
Contact details of provider:
Postal: Stanford University, Stanford, CA 94305-5015
Phone: (650) 723-2146
Web page: http://gsbapps.stanford.edu/researchpapers/
More information through EDIRC
Find related papers by JEL classification:
- C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
- D74 - Microeconomics - - Analysis of Collective Decision-Making - - - Conflict; Conflict Resolution; Alliances
- F10 - International Economics - - Trade - - - General
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-11-21 (All new papers)
- NEP-GTH-2011-11-21 (Game Theory)
- NEP-INT-2011-11-21 (International Trade)
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.:
- Rosendorff, B. Peter & Milner, Helen V., 2001. "The Optimal Design of International Trade Institutions: Uncertainty and Escape," International Organization, Cambridge University Press, vol. 55(04), pages 829-857, September.
- Richard Chisik & Harun Onder, 2010. "Limiting Cross-Retaliation when Punishment is Limited: How DSU Article 22.3 Complements GATT Article XXVIII," Working Papers 025, Ryerson University, Department of Economics.
- Beshkar, Mostafa, 2010. "Optimal remedies in international trade agreements," European Economic Review, Elsevier, vol. 54(3), pages 455-466, April.
- Kennan, John & Riezman, Raymond, 1988. "Do Big Countries Win Tariff Wars?," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 29(1), pages 81-85, February.
- Syropoulos, Constantinos, 2002.
"Optimum Tariffs and Retaliation Revisited: How Country Size Matters,"
Review of Economic Studies,
Wiley Blackwell, vol. 69(3), pages 707-27, July.
- Constantinos Syropoulos, 2002. "Optimum Tariffs and Retaliation Revisited: How Country Size Matters," Review of Economic Studies, Oxford University Press, vol. 69(3), pages 707-727.
- B. Douglas Bernheim & Michael D. Whinston, 1990. "Multimarket Contact and Collusive Behavior," RAND Journal of Economics, The RAND Corporation, vol. 21(1), pages 1-26, Spring.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().
If references are entirely missing, you can add them using this form.