The Zollverein and the Sequence of a Customs Union

The Zollverein was the first international customs union, essentially defining these particular trade agreements. This paper utilizes the predictions of a game theoretic model to analyse the observed sequence of accessions into this union. Coalition externalities, the effects the accession of one state has on states remaining on the outside, are the central mechanisms explaining the negotiations between Prussia, the agenda setter, and other German states. This is demonstrated by detailing these financial, strategic and political externalities and demonstrating their influence on trade policy decisions.