A Mechanism Design of Dispute Resolution Systems in a Regional-Free Trade Agreement

Dragan Miljkovic and Miguel Gomez

Journal of Agricultural & Food Industrial Organization, 2013, vol. 11, issue 1, 113-128

Abstract: We examine the problem of mechanism design of how individual produce firms within NAFTA make their decisions to belong to the Dispute Resolution Corporation (DRC) when facing a set of criteria to which they previously agreed upon. We design a dominant strategy (the truth-telling) mechanism where both Pareto optimality and optimization of DRC’s welfare are achieved. If there are pivotal firms within the DRC, necessary assumptions made for such a mechanism to work cannot be all satisfied. Next, we compare the assumptions necessary for the mechanism to function and the current system for dispute resolution of the DRC. Casual empiricism and to-date existence of the DRC suggest the existence of pivotal firms.

Keywords: dispute resolution system; mechanism design; NAFTA (search for similar items in EconPapers)
Date: 2013
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DOI: 10.1515/jafio-2013-0006

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