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Strategic games modles of economic integration

By H. Haller and Y. Ioannides

Abstract

We set up two country games to express strategic aspects of economic integration, where integration requires overcoming fixed costs in the form of a vector of resources, the two countries'' agents'' characteristics are diverse, and each country''s contribution is subject to strategic choice. Individual agents'' payoff depend, for any given trade allocation rule, on how integration costs are shared. We show existence of equilibrium and explore the properties of the game. A number of examples demonstrate that autarky or a multiplicity of Nash equilibria, some of which are Pareto rankable, are possible outcomes. We also explore certain strategic aspects of economic integration of the three country case

Topics: HB Economic Theory
Publisher: Centre for Economic Performance, London School of Economics and Political Science
Year: 1995
OAI identifier: oai:eprints.lse.ac.uk:20755
Provided by: LSE Research Online
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