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Breach, Remedies and Dispute Settlement in Trade Agreements

Giovanni Maggi and Robert Staiger ()

No 7527, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We provide a simple but novel model of trade agreements that highlights the role of transaction costs, renegotiation and dispute settlement. The model allows us to characterize the appropriate remedy for breach and whether the agreement should be structured as a system of "property rights" or "liability rules." We then study how the optimal rules depend on the underlying economic and contracting environment. Our model also delivers predictions about the outcome of trade disputes, and in particular about the propensity of countries to settle early versus "fighting it out."

Keywords: breach remedies; dispute settlement; international trade agreements (search for similar items in EconPapers)
JEL-codes: D02 D86 F13 K12 K33 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-int
Date: 2009-11
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Working Paper: Breach, Remedies and Dispute Settlement in Trade Agreements (2009) Downloads
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