This paper derives Abreu's (1986) stick-and-carrot strategy optimal penal codes in a partial equilibrium model that has been widely used to examine trade liberalization. Unless the asymmetry between countries is significant, the optimal penal codes take simple form. It is also shown that the...

We consider a two-stage public goods provision game: In the first stage, players simultaneously decide if they will join a contribution group or not. In the second stage, players in the contribution group simultaneously offer contribution schemes in order to influence the government's choice on...

We show that under a two-party political system the party in office tends to be present-biased and time-inconsistent. This may lead to inefficient procrastination of socially beneficial projects. However, procrastination needs not be indefinite. There exist equilibria in which the project is...

We consider trade policies intended to affect the production of a foreign monopolist that generates negative externalities. We derive the optimal tariff and optimal import quota and examine which policy measure should be used to maximize domestic welfare. We find that if the domestic government...

The paper examines the formation of free trade agreements (FTAs) as a network formation game. We consider a general n-country model in which countries trade differentiated industrial commodities as well as a numeraire good. Countries may be different in the size of the industrial good industry...

This paper studies the global dynamics of a class of infinitely repeated two-player games in which the action space of each player is an interval, and the one-shot payoff of each player is additively separable in actions. We define an immediately reactive equilibrium (IRE) as a pure-strategy...

Negotiation games in which two players engage in disagreement games to determine their payoffs during the bargaining generally admit multiple perfect equilibrium outcomes, including inefficient ones. This paper shows that if the two players cannot change their disagreement actions as frequent as...

We consider a two-stage public goods provision game: In the first stage, players simultaneously decide if they will join a contribution group or not. In the second stage, players in the contribution group simultaneously offer contribution schemes in order to influence the government’s choice...

We build a general equilibrium model of endogenous communication, quality control and trade. We derive a structural gravity equation from the model and show that exogenous communication costs raise the costs of quality control and have a larger impact on products with a lower elasticity of...

We examine how the bidding environment may affect the outcome of tax competition between two countries (or two regions) in attracting a firm's foreign direct investment (FDI). We compare the equilibrium location choice and payoffs from an English auction, with both complete and incomplete...