Myopic or farsighted: bilateral trade agreements among three symmetric countries

Kenmei Tsubota and Yujiro Kawasaki

No 274, IDE Discussion Papers from Institute of Developing Economies, Japan External Trade Organization(JETRO)

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.

Keywords: International trade; International agreements; Trade policy; Endogenous network formation; Bilateral trade agreement; Myopic and farsighted behavior (search for similar items in EconPapers)
JEL-codes: F14 F15 (search for similar items in EconPapers)
Date: 2011-01
New Economics Papers: this item is included in nep-gth, nep-int and nep-net
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Published in IDE Discussion Paper = IDE Discussion Paper, No. 274. 2011-01

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Journal Article: Myopic or farsighted: bilateral trade agreements among three symmetric countries (2019)
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