Strategic Interaction and Trade Policymaking: Formal Analysis and Simulation

William Roberts Clark, Erick Duchesne and William L. Reed

The World Economy, 2006, vol. 29, issue 4, 507-520

Abstract: This paper introduces a simple game‐theoretic model and a Monte Carlo simulation of trade negotiations with the aim of identifying the nature of the selection bias that may threaten valid inference from empirical tests relying on data from trade disputes. Insights from the formal model are used to critically engage recent empirical analyses. This model is applied more specifically to the American use of Section 301 as an instrument to prise open foreign markets. The results of the game‐theoretical model and the Monte Carlo simulation demonstrate that, despite significant statistical results, models of trade negotiations might potentially suffer from misspecification due to non‐random selection effects.

Date: 2006
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https://doi.org/10.1111/j.1467-9701.2006.00797.x

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Persistent link: https://EconPapers.repec.org/RePEc:bla:worlde:v:29:y:2006:i:4:p:507-520

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