American Economic Review Vol. 100 No. 1 2010

Trade Agreements as Endogenously Incomplete Contracts

Henrik Horn¹; Giovanni Maggi²; Robert W. Staiger³

¹ Research Institute of Industrial Economics, Box 55665, SE-102 15 Stockholm, Sweden, Bruegel, and CEPR. · ² Department of Economics, Yale University, New Haven, CT 06520, NBER, and CEPR. · ³ Department of Economics, Stanford University, 579 Serra Mall, Stanford, CA 94305, and NBER.

Abstract

We propose a model of trade agreements in which contracting is costly, and as a consequence the optimal agreement may be incomplete. In spite of its simplicity, the model yields rich predictions on the structure of the optimal trade agreement and how this depends on the fundamentals of the contracting environment. We argue that taking contracting costs explicitly into account can help explain a number of key features of real trade agreements.

DOI

10.1257/aer.100.1.394

Volume

100

Issue

1

Pages

394-419

Language

en

Sources

crossref bibtex:phds-export.bib openalex

Cite

APA 7 MLA 9 Chicago (author–date) Harvard Elsevier Harvard (JFE, JBF…) The Accounting Review Academy of Management American Marketing Association INFORMS (Management Science) Copy citation Copied ✓