IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

International agreements on product standard: an incomplete contracting theory

  • Pierpaolo Battigalli
  • Giovanni Maggi

We propose a theory of international agreements on product standards. The key feature of the model is that agreements are viewed as incomplete contracts. In particular, these do not specify standards for products that may arise in the future. One potential remedy to contractual incompleteness is a dispute settlement procedure (DSP) that provides arbitration in states of the world that are not covered by the ex ante agreement. We identify conditions under which a DSP can provide ex-ante efficiency gains, and examine how these gains depend on the fundamentals of the problem. Another potential remedy to contractual incompleteness is given by rigid rules, i.e. rules that are not product-specific. We argue that the nondiscrimination rule is the only rule of this kind that increases ex ante efficiency for any probability distribution over potential products. Finally we show that, under relatively weak conditions, the optimal ex-ante agreement is structured in three parts: (i) a set of clauses that specify standards for existing products; (ii) a rigid nondiscrimination rule, and (iii) a dispute settlement procedure. Although the model focuses on the case of product standards, the analysis suggests a more general incomplete-contracting theory of trade agreements.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.nber.org/papers/w9533.pdf
Download Restriction: no

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 9533.

as
in new window

Length:
Date of creation: Mar 2003
Date of revision:
Handle: RePEc:nbr:nberwo:9533
Note: ITI
Contact details of provider: Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
Phone: 617-868-3900
Web page: http://www.nber.org
Email:


More information through EDIRC

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Eduardo M.R.A. Engel, 2000. "Poisoned Grapes, Mad Cows and Protectionism," Documentos de Trabajo 76, Centro de Economía Aplicada, Universidad de Chile.
  2. Daniel M. Sturm, 2001. "Product Standards, Trade Disputes and Protectionism," CEP Discussion Papers dp0486, Centre for Economic Performance, LSE.
  3. Brian R. Copeland & M. Scott Taylor, 2001. "International Trade and the Environment: A Framework for Analysis," NBER Working Papers 8540, National Bureau of Economic Research, Inc.
  4. Binmore, Ken & Osborne, Martin J. & Rubinstein, Ariel, 1992. "Noncooperative models of bargaining," Handbook of Game Theory with Economic Applications, in: R.J. Aumann & S. Hart (ed.), Handbook of Game Theory with Economic Applications, edition 1, volume 1, chapter 7, pages 179-225 Elsevier.
  5. Josh Ederington, 2001. "International Coordination of Trade and Domestic Policies," American Economic Review, American Economic Association, vol. 91(5), pages 1580-1593, December.
  6. Grossman, G.M. & Helpman, E., 1992. "Protection for Sale," Papers 162, Princeton, Woodrow Wilson School - Public and International Affairs.
  7. Giovanni Maggi, 1999. "The Role of Multilateral Institutions in International Trade Cooperation," American Economic Review, American Economic Association, vol. 89(1), pages 190-214, March.
  8. Pierpaolo Battigalli & Giovanni Maggi, 2002. "Rigidity, Discretion, and the Costs of Writing Contracts," American Economic Review, American Economic Association, vol. 92(4), pages 798-817, September.
  9. Otsuki, Tsunehiro & Wilson, John S. & Sewadeh, Mirvat, 2001. "Saving two in a billion: : quantifying the trade effect of European food safety standards on African exports," Food Policy, Elsevier, vol. 26(5), pages 495-514, October.
  10. Robert W. Staiger & Kyle Bagwell, 1999. "An Economic Theory of GATT," American Economic Review, American Economic Association, vol. 89(1), pages 215-248, March.
  11. Robert Gibbons, 1988. "Learning In Equilibrium Models of Arbitration," NBER Working Papers 2547, National Bureau of Economic Research, Inc.
  12. Ariel Rubinstein, 2010. "Perfect Equilibrium in a Bargaining Model," Levine's Working Paper Archive 661465000000000387, David K. Levine.
  13. Sebenius, James K., 1983. "Negotiation arithmetic: adding and subtracting issues and parties," International Organization, Cambridge University Press, vol. 37(02), pages 281-316, March.
  14. Nöldeke, Georg & Schmidt, Klaus M., 1995. "Option contracts and renegotiation: A solution to the Hold-Up Problem," Munich Reprints in Economics 19329, University of Munich, Department of Economics.
  15. Hungerford, Thomas L., 1991. "GATT: A cooperative equilibrium in a noncooperative trading regime?," Journal of International Economics, Elsevier, vol. 31(3-4), pages 357-369, November.
  16. Gandal, N. & Shy, O., 1996. "Standardization Policy and International Trade," Papers 12-96, Tel Aviv - the Sackler Institute of Economic Studies.
  17. Martin J. Osborne & Ariel Rubinstein, 2005. "Bargaining and Markets," Levine's Bibliography 666156000000000515, UCLA Department of Economics.
  18. Maggi, G & Rodriguez-Clare, A, 1996. "The Value of Trade Agreements in the Presence of Political Pressures," Papers 180, Princeton, Woodrow Wilson School - Public and International Affairs.
  19. Fischer, Ronald & Serra, Pablo, 2000. "Standards and protection," Journal of International Economics, Elsevier, vol. 52(2), pages 377-400, December.
  20. Dan Kovenock & Marie Thursby, 1992. "GATT, Dispute Settlement and Cooperation," NBER Working Papers 4071, National Bureau of Economic Research, Inc.
  21. Marco Battaglini, 2002. "Multiple Referrals and Multidimensional Cheap Talk," Econometrica, Econometric Society, vol. 70(4), pages 1379-1401, July.
  22. 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.
  23. Vijay Krishna & John Morgan, 1999. "A Model of Expertise," Game Theory and Information 9902003, EconWPA.
    • Vijay Krishna & John Morgan, 1999. "A Model of Expertise," Working Papers 154, Princeton University, Woodrow Wilson School of Public and International Affairs, Discussion Papers in Economics..
    • Krishna, V. & Morgan, J., 1999. "A Model of Expertise," Papers 206, Princeton, Woodrow Wilson School - Public and International Affairs.
  24. Crawford, Vincent P, 1979. "On Compulsory-Arbitration Schemes," Journal of Political Economy, University of Chicago Press, vol. 87(1), pages 131-59, February.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:9533. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.