Trade Wars, Trade Negotiations and Applied Game Theory

Glenn Harrison and Elisabet Rutstrom

Economic Journal, 1991, vol. 101, issue 406, 420-35

Abstract: The authors propose a methodological extension of quantitative "cost of protection" analyses to consider elementary game-theoretic aspects of the policy process. They illustrate these ideas by evaluating size propositions: nations can "win" trade wars; multilateral negotiations that "merely preserve the status quo" have some value; the terms of the U.S.-Canada free trade agreement can be strategically rationalized; threat points matter in trade negotiations; the negotiating practice of comparing the "value" of one country's concessions with another can dramatically influence bargaining outcomes; and that the substance of multilateral negotiations can be achieved by bilateral negotiations between the bigger countries. Copyright 1991 by Royal Economic Society.

Date: 1991
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