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Multi-Issue Bargaining and Linked Agendas: Ricardo Revisited or No Pain No Gain


  • Ignatius J. Horstmann
  • James R. Markusen
  • Jack Robles


There has been much discussion about what issues should be included in international 'trade' negotiations. Different countries, firms and activists groups have quite different views regarding which items should (or should not) be negotiated together. Proposals run the gamut from no linking to linking trade with investment, the environment, labor and human-rights codes. This paper provides a formal framework for analyzing these questions. It employs a two-country, two-issue bargaining model and contrasts outcomes when issues are negotiated separately and when they are linked in some form. A key concept is 'comparative interest', analogous to Ricardian comparative advantage. We provide general results and note, in particular, where a country can benefit by agreeing to include an agenda item for which, when viewed by itself, the country does not receive a positive payoff.

Suggested Citation

  • Ignatius J. Horstmann & James R. Markusen & Jack Robles, 2001. "Multi-Issue Bargaining and Linked Agendas: Ricardo Revisited or No Pain No Gain," NBER Working Papers 8347, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:8347
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    References listed on IDEAS

    1. Rubinstein, Ariel, 1982. "Perfect Equilibrium in a Bargaining Model," Econometrica, Econometric Society, vol. 50(1), pages 97-109, January.
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    3. Lisandro Abrego & Carlo Perroni & John Whalley & Randall M. Wigle, 1997. "Trade and Environment: Bargaining Outcomes from Linked Negotiations," NBER Working Papers 6216, National Bureau of Economic Research, Inc.
    4. Nash, John, 1950. "The Bargaining Problem," Econometrica, Econometric Society, vol. 18(2), pages 155-162, April.
    5. Busch, Lutz-Alexander & Horstmann, Ignatius J, 1997. "Bargaining Frictions, Bargaining Procedures and Implied Costs in Multiple-Issue Bargaining," Economica, London School of Economics and Political Science, vol. 64(256), pages 669-680, November.
    6. Kyle Bagwell & Robert W. Staiger, 2001. "Domestic Policies, National Sovereignty, and International Economic Institutions," The Quarterly Journal of Economics, Oxford University Press, vol. 116(2), pages 519-562.
    7. Conconi, Paola & Perroni, Carlo, 2002. "Issue linkage and issue tie-in in multilateral negotiations," Journal of International Economics, Elsevier, vol. 57(2), pages 423-447, August.
    8. Copeland, Brian R & Taylor, M Scott, 1995. "Trade and Transboundary Pollution," American Economic Review, American Economic Association, vol. 85(4), pages 716-737, September.
    9. Inderst, Roman, 2000. "Multi-issue Bargaining with Endogenous Agenda," Games and Economic Behavior, Elsevier, vol. 30(1), pages 64-82, January.
    10. Lutz-Alexander Busch & Ignatius Horstmann, 1999. "Endogenous Incomplete Contracts: A Bargaining Approach," Canadian Journal of Economics, Canadian Economics Association, vol. 32(4), pages 956-975, August.
    11. Fershtman, Chaim, 1990. "The importance of the agenda in bargaining," Games and Economic Behavior, Elsevier, vol. 2(3), pages 224-238, September.
    12. Byoung Heon Jun, 1989. "Non-cooperative Bargaining and Union Formation," Review of Economic Studies, Oxford University Press, vol. 56(1), pages 59-76.
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    Cited by:

    1. Drusilla K. Brown & Alan V. Deardorff & Robert M. Stern, 2009. "Pros and Cons of Linking Trade and Labor Standards," World Scientific Book Chapters,in: Globalization And International Trade Policies, chapter 16, pages 599-621 World Scientific Publishing Co. Pte. Ltd..
    2. Limao, Nuno, 2005. "Trade policy, cross-border externalities and lobbies: do linked agreements enforce more cooperative outcomes?," Journal of International Economics, Elsevier, vol. 67(1), pages 175-199, September.
    3. Markusen, James R., 2012. "Per-Capita Income as a Determinant of International Trade and Environmental Policies," Discussion Papers 2013-06, Graduate School of Economics, Hitotsubashi University.
    4. James R. Markusen, 2014. "Per-Capital Income as a Determinant of International Trade and Environment Policies," CESifo Working Paper Series 4618, CESifo Group Munich.
    5. Hirbod Assa & Sheridon Elliston & Ehud Lehrer, 2016. "Joint games and compatibility," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 61(1), pages 91-113, January.
    6. Rauscher, Michael, 2001. "International trade, foreign investment, and the environment," Thuenen-Series of Applied Economic Theory 29, University of Rostock, Institute of Economics.
    7. Pierpaolo Battigalli & Giovanni Maggi, 2003. "International agreements on product standard: an incomplete contracting theory," NBER Working Papers 9533, National Bureau of Economic Research, Inc.

    More about this item

    JEL classification:

    • F2 - International Economics - - International Factor Movements and International Business
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations


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