Bilateral trade agreements and the feasibility of multilateral free trade

Kamal Saggi () and Halis Yildiz

MPRA Paper from University Library of Munich, Germany

Abstract: This paper compares stable Nash equilibria of two games of trade liberalization. In the FTA game, each country can form an FTA with either one of its trade partners, or both of them, or none of them. By contrast, in the No FTA game, each country must choose either no agreement or free trade. Under symmetry, free trade is uniquely stable under the No FTA game whereas the FTA game also admits a bilateral FTA as an equilibrium. However, there exist patterns of cost asymmetry for which the freedom to pursue bilateral FTAs is necessary for achieving global free trade.

Keywords: Multilateral Trade Liberalization; Free Trade Agreements; GATT; Intraindustry Trade; Oilgopoly (search for similar items in EconPapers)
JEL-codes: F12 F13 (search for similar items in EconPapers)
Date: 2008-02-01, Revised 2009-06-26
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (14)

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Related works:
Chapter: Bilateral Trade Agreements and the Feasibility of Multilateral Free Trade (2018)
Journal Article: Bilateral Trade Agreements and the Feasibility of Multilateral Free Trade (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:17561

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