Document Type
Working Paper
Publication Date
2-2008
Abstract
This paper compares stable Nash equilibria of two games of trade liberalization. In the FTA game, each country can form an FTA with either one of its trade partners, or both of them, or none of them. By contrast, in the No FTA game, each country must choose either no agreement or free trade. Under symmetry, free trade is uniquely stable under the No FTA game whereas the FTA game also admits a bilateral FTA as an equilibrium. However, there exist patterns of cost asymmetry for which the freedom to pursue bilateral FTAs is necessary for achieving global free trade.
Recommended Citation
Saggi, Kamal and Yildiz, Halis Murat, "Bilateral trade agreements and the feasibility of multilateral free trade" (2008). Economics Publications and Research. Paper 29.
http://digitalcommons.ryerson.ca/economics/29
Comments
Also available for download here: http://mpra.ub.uni-muenchen.de/17561/