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Myopic or farsighted: bilateral trade agreements among three symmetric countries

Yujiro Kawasaki () and Kenmei Tsubota ()
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Yujiro Kawasaki: Kyoto University of Advanced Science
Kenmei Tsubota: Institute of Developing Economies - Japan External Trade Organization

Letters in Spatial and Resource Sciences, 2019, vol. 12, issue 3, 233-256

Abstract: Abstract We examine network formation through bilateral trade agreements (BTA) among three symmetric countries. Each government decides whether to form a link or not via a BTA depending on the differential of the ex-post and ex-ante sum of real wages in the country. Setting the governmental decision in two forms, myopic and farsighted, we analyze the resulting network formation. Firstly, we find that both myopic and farsighted games achieve complete networks. Secondly, networks resulting from myopic games coincide with those resulting from farsighted games.

Keywords: Endogenous network formation; Bilateral trade agreement; Myopic and farsighted behaviors (search for similar items in EconPapers)
JEL-codes: F12 F15 (search for similar items in EconPapers)
Date: 2019
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DOI: 10.1007/s12076-019-00239-9

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