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When the claim hits: bilateral investment treaties and bounded rational learning

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  • Poulsen, Lauge N. Skovgaard
  • Aisbett, Emma

Abstract

Using the international investment regime as its point of departure, the paper applies notions of bounded rationality to the study of economic diplomacy. Through a multi-method approach, it shows that developing countries often ignored the risks of bilateral investment treaties (BITs) until they themselves became subject to an investment treaty claim. Thus the behavior of developing country governments with regard to the international investment regime is consistent with that consistently observed for individuals in experiments and field studies: they tend to ignore high-impact, low-probability risks if they cannot bring specific ‘vivid’ instances to mind.

Suggested Citation

  • Poulsen, Lauge N. Skovgaard & Aisbett, Emma, 2013. "When the claim hits: bilateral investment treaties and bounded rational learning," LSE Research Online Documents on Economics 45035, London School of Economics and Political Science, LSE Library.
    • Handle: RePEc:ehl:lserod:45035
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    References listed on IDEAS

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    Keywords

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    JEL classification:

    • F00 - International Economics - - General - - - General
    • F02 - International Economics - - General - - - International Economic Order and Integration
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F20 - International Economics - - International Factor Movements and International Business - - - General
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • F51 - International Economics - - International Relations, National Security, and International Political Economy - - - International Conflicts; Negotiations; Sanctions
    • F53 - International Economics - - International Relations, National Security, and International Political Economy - - - International Agreements and Observance; International Organizations
    • K33 - Law and Economics - - Other Substantive Areas of Law - - - International Law

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