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Myopic or farsighted : bilateral trade agreements among three symmetric countries

  • Tsubota, Kenmei
  • Kawasaki, Yujiro
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    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.

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    File URL: http://ir.ide.go.jp/dspace/bitstream/2344/940/1/ARRIDE_Discussion_No.274_tsubota.pdf
    File Function: First version, 2011
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    Paper provided by Institute of Developing Economies, Japan External Trade Organization(JETRO) in its series IDE Discussion Papers with number 274.

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    Date of creation: Jan 2011
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    Publication status: Published in IDE Discussion Paper. No. 274. 2011. 1
    Handle: RePEc:jet:dpaper:dpaper274
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    1. Behrens, Kristian, 2007. "On the location and lock-in of cities: Geography vs transportation technology," Regional Science and Urban Economics, Elsevier, vol. 37(1), pages 22-45, January.
    2. Furusawa, Taiji & Konishi, Hideo, 2007. "Free trade networks," Journal of International Economics, Elsevier, vol. 72(2), pages 310-335, July.
    3. 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.
    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. 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.
    6. Hiroshi Mukunoki & Kentaro Tachi, 2006. "Multilateralism and Hub-and-Spoke Bilateralism," Review of International Economics, Wiley Blackwell, vol. 14(4), pages 658-674, 09.
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