Threats and Promises
AbstractGlobal environmental concerns have increased the sensitivity of governments and other parties to the actions of those outside their national jurisdiction. Parties have tried to extend influence extraterritorially both by promising to reward desired behavior and by threatening to punish undesired behavior. If information were perfect, the Coase theorem would suggest that either method of seeking influence could provide an efficient outcome. If the parties in question have incomplete information about each other's costs and benefits from different actions, however, either method can be costly, both to those seeking influence and in terms of overall efficiency. We compare various methods of seeking influence. A particular issue is dissembling: taking an action to mislead the other party about the cost or benefit of that action. By creating an incentive to dissemble, attempts to influence another's behavior can have the perverse effect of actually encouraging the action that one is trying to discourage.
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Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 4849.
Date of creation: Sep 1994
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Other versions of this item:
- Jonathan Eaton & Maxim Engers, 1994. "Threats and Promises," Boston University - Institute for Economic Development, Boston University, Institute for Economic Development 49, Boston University, Institute for Economic Development.
- F02 - International Economics - - General - - - International Economic Order; Noneconomic International Organizations;; Economic Integration and Globalization: General
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- Gary Clyde Hufbauer & Jeffrey J. Schott & Kimberly Ann Elliott, 1990. "Economic Sanctions Reconsidered: 2nd Edition," Peterson Institute Press: All Books, Peterson Institute for International Economics, Peterson Institute for International Economics, number 82, July.
- Taiji Furusawa, 2001. "Threats and Concessions in Tariff Settings," Boston University - Department of Economics - The Institute for Economic Development Working Papers Series, Boston University - Department of Economics dp-123, Boston University - Department of Economics.
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