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Forming Efficient Free‐Trade Networks: A Sequential Mechanism
Author(s) -
Zhang Jin,
Xue Licun,
Yin Xiaopeng
Publication year - 2011
Publication title -
review of international economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.513
H-Index - 58
eISSN - 1467-9396
pISSN - 0965-7576
DOI - 10.1111/j.1467-9396.2011.00955.x
Subject(s) - subgame perfect equilibrium , economics , outcome (game theory) , free trade , markov perfect equilibrium , mechanism (biology) , mathematical economics , subgame , network formation , international trade , microeconomics , computer science , repeated game , nash equilibrium , game theory , equilibrium selection , physics , quantum mechanics , world wide web
Abstract This paper considers a sequential network formation game, whose subgame‐perfect equilibrium can generate an efficient and complete network as the equilibrium outcome, thereby achieving global free trade. Our result shows that bilateral free‐trade agreements can be compatible with global free trade.