A Theory of Economic Sanctions

Baran Han
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Baran Han: KDI School of Public Policy and Management

No 12-3, Working Papers from Korea Institute for International Economic Policy

Abstract: This paper presents a work-horse model to analyze the mechanism of triadic sanctions, where the receiver of the sanction is not the actual target. With a motivating example of the US sanctions against Iran and a simple game theoretic framework, we show that the threat of such sanction is not credible in situations where the game ends after single stage, or when the entities are not concerned with future transactions amongst each other. In a repeated game setting, on the other hand, the threats become credible, but the level of enforcement would differ across firms/countries depending on the economic interdependency and how the parties perceive the probability that the games would continue to the next period.

Keywords: Iran Sanctions; Triadic Sanctions (search for similar items in EconPapers)
JEL-codes: F51 F59 O53 (search for similar items in EconPapers)
Pages: 46 pages
Date: 2012-09-20
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Citations: View citations in EconPapers (1)

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