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A game model of ASEAN trade liberalization

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  • Tom Jackson

Abstract

This paper presents a descriptive game model of economic cooperation in the Association of Southeast Asian Nations (ASEAN). ASEAN's members appear in the game as Bayesian players, who maximize expected national welfare and who revise their expectations on the basis of new information. A payoff matrix is constructed through a comparative historical analysis of the players' perceptions of two different policy alternatives: one to liberalize trade quickly with across-the-board tariff cuts; the other to liberalize trade slowly on a commodity-by-commodity basis. The concept of risk dominance provides a solution to the game that explains why in 1977 ASEAN chose a joint strategy of slow trade liberalization. Payoffs revised on the basis of an analysis of events since 1977 yield a new solution that explains why ASEAN stepped up the pace of liberalization in 1987. The paper concludes with an analysis of implications for the future of trade liberalization in ASEAN, and puts forward a falsifiable hypothesis that trade liberalization within ASEAN may continue to accelerate. Copyright Kluwer Academic Publishers 1991

Suggested Citation

  • Tom Jackson, 1991. "A game model of ASEAN trade liberalization," Open Economies Review, Springer, vol. 2(3), pages 237-254, October.
    • Handle: RePEc:kap:openec:v:2:y:1991:i:3:p:237-254
    DOI: 10.1007/BF01886143
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    References listed on IDEAS

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    1. John C. Harsanyi & Reinhard Selten, 1988. "A General Theory of Equilibrium Selection in Games," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262582384, December.
    2. Putnam, Robert D., 1988. "Diplomacy and domestic politics: the logic of two-level games," International Organization, Cambridge University Press, vol. 42(3), pages 427-460, July.
    3. von Hayek, Friedrich August, 1989. "The Pretence of Knowledge," American Economic Review, American Economic Association, vol. 79(6), pages 3-7, December.
    4. Simon, Herbert A., 1985. "Human Nature in Politics: The Dialogue of Psychology with Political Science," American Political Science Review, Cambridge University Press, vol. 79(2), pages 293-304, June.
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    Cited by:

    1. Frankel, Jeffrey A. & Wei, Shang-Jin, 1996. "ASEAN in a Regional Perspective," Center for International and Development Economics Research (CIDER) Working Papers 233438, University of California-Berkeley, Department of Economics.
    2. Jeffrey A. Frankel, 1993. "Is Japan Creating a Yen Bloc in East Asia and the Pacific?," NBER Chapters, in: Regionalism and Rivalry: Japan and the United States in Pacific Asia, pages 53-88, National Bureau of Economic Research, Inc.

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