Free Trade Agreements as dynamic farsighted networks
AbstractIn the presence of multilateral negotiations, are Free Trade Agreements (FTAs) necessary for, or will they prevent, free trade? This question is explored using a novel dynamic network theoretic model where countries are farsighted and asymmetric in terms of market size. I develop a new equilibrium concept that endogenizes the order of negotiations. FTAs are necessary for free trade when there are two small countries and one large country but FTAs prevent free trade when there are two large countries and one small country. The model provides insights into the dynamics of recent trade negotiations involving the US.
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Bibliographic InfoPaper provided by Southern Methodist University, Department of Economics in its series Departmental Working Papers with number 1304.
Date of creation: Jun 2013
Date of revision:
Contact details of provider:
Postal: Department of Economics, P.O. Box 750496, Southern Methodist University, Dallas, TX 75275-0496
Web page: http://www.smu.edu/economics
Free Trade Agreements; preference erosion; multilateralism; free trade; networks; farsighted.;
Find related papers by JEL classification:
- C71 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Cooperative Games
- F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
- F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-07-05 (All new papers)
- NEP-GTH-2013-07-05 (Game Theory)
- NEP-INT-2013-07-05 (International Trade)
- NEP-NET-2013-07-05 (Network Economics)
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- James Lake & Halis M. Yildiz, 2014. "On the different geographic characteristics of Free Trade Agreements and Customs Unions," Departmental Working Papers 1403, Southern Methodist University, Department of Economics.
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