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Myopic or farsighted : bilateral trade agreements among three symmetric countries

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  • Tsubota, Kenmei
  • Kawasaki, Yujiro

Abstract

We examine network formation via bilateral trade agreement (BTA) among three symmetric countries. Each government decides whether to form a link or not via a BTA depending on the differential of ex-post and ex-ante sum of real wages in the country. We model the governmental decision in two forms, myopic and farsighted and analyze the effects on the BTA network formation. First, we find that both myopic and farsighted games never induce the formation of star networks nor empty networks. Second, the networks resulting from myopic game coincides with those resulting from farsighted games.

Suggested Citation

  • Tsubota, Kenmei & Kawasaki, Yujiro, 2011. "Myopic or farsighted : bilateral trade agreements among three symmetric countries," IDE Discussion Papers 274, Institute of Developing Economies, Japan External Trade Organization(JETRO).
  • Handle: RePEc:jet:dpaper:dpaper274
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    References listed on IDEAS

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    1. Kristian Behrens & Carl Gaigné & Gianmarco I.P. Ottaviano & Jacques-François Thisse, 2006. "Is remoteness a locational disadvantage?," Journal of Economic Geography, Oxford University Press, vol. 6(3), pages 347-368, June.
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    4. Mori, Tomoya & Nishikimi, Koji, 2002. "Economies of transport density and industrial agglomeration," Regional Science and Urban Economics, Elsevier, vol. 32(2), pages 167-200, March.
    5. Hiroshi Mukunoki & Kentaro Tachi, 2006. "Multilateralism and Hub-and-Spoke Bilateralism," Review of International Economics, Wiley Blackwell, vol. 14(4), pages 658-674, September.
    6. Takanori Ago & Ikumo Isono & Takatoshi Tabuchi, 2006. "Locational disadvantage of the hub," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 40(4), pages 819-848, December.
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    More about this item

    Keywords

    International trade; International agreements; Trade policy; Endogenous network formation; Bilateral trade agreement; Myopic and farsighted behavior;

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F15 - International Economics - - Trade - - - Economic Integration

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