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Trade Negotiations under Alternative Bargaining Structure
Author(s) -
Sen Neelanjan,
Biswas Rajit
Publication year - 2015
Publication title -
economics and politics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.822
H-Index - 45
eISSN - 1468-0343
pISSN - 0954-1985
DOI - 10.1111/ecpo.12067
Subject(s) - negotiation , economics , bargaining power , externality , multilateral trade negotiations , bargaining problem , international trade , microeconomics , international economics , free trade , political science , law
We build a bargaining model, in which a country (leader) decides whether or not to form a free trade agreement with other nations (followers), either through a sequential or a multilateral bargaining procedure. Unlike Aghion et al. ([Aghion, P., 2007], Journal of International Economics , 73, 1–30), in our specification of multilateral bargaining, the leader can collude with all those follower countries who agree to its offer. This has important implications for the choice of sequential and multilateral bargaining by the leader in presence of coalition externalities. Moreover, this bargaining procedure ensures that “stumbling block” equilibrium will never occur.