Policy Linkage and Uncertainty in International Agreements | Zendy

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Policy Linkage and Uncertainty in International Agreements

Author(s) -

Ederington Josh

Publication year - 2003

Publication title -

economic inquiry

Language(s) - English

Resource type - Journals

SCImago Journal Rank - 0.823

H-Index - 72

eISSN - 1465-7295

pISSN - 0095-2583

DOI - 10.1093/ei/cbg010

Subject(s) - cheating , linkage (software) , punishment (psychology) , economics , microeconomics , contrast (vision) , game theory , computer science , social psychology , psychology , biochemistry , chemistry , gene , artificial intelligence

This article uses noncooperative game theory to analyze the potential benefits of linking trade agreements to agreements covering domestic policies in a world of uncertainty. I show that nonlinkage is more desirable if there is a positive probability that a country will erroneously believe that its trading partner is cheating on the agreement (triggering an unnecessary punishment phase). In contrast, linkage is more desirable if there is a positive probability that cheating will go unnoticed.

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