Skip to main content
Article thumbnail
Location of Repository

Why are trade agreements regional? A theory based on noncooperative networks

By Ben Zissimos


This paper argues that free trade agreements (FTAs) are regional because, in their absence, optimal tariffs are higher against (close)regional partners than (distant) countries outside the region. Optimal tarffs shift rents from foreign firms to domestic citizens. Lower transport costs imply higher rents and therefore higher tarffs. So regional FTAs have a higher pay-off than non-regional FTAs. Therefore, only regional FTAs may yield positive gains when sponsoring a FTA is costly. To analyze equilibrium, standard theory of non-cooperative networks is extended to allow for asymmetric players. Naive best response dynamics show that ‘trade blocks can be stepping blocks’ for free trade

Topics: HF, QA
Publisher: University of Warwick, Department of Economics
Year: 2002
OAI identifier:

Suggested articles


  1. (2000). Communication Situations with Asymmetric Players.” doi
  2. (1977). Graphs and Cooperation in doi
  3. (1991). Is Bilateralism Bad?” doi
  4. (1999). Multilateralism, Regionalism, and the Sustatainability of ‘Natural’ Trading Blocs.” Penn State University mimeograph.
  5. (1984). Tari¤ Protection and Imperfect competition.” c h a p t e ri nH .K i e r k o w s k i( e d . )Monopolistic Competition and International Trade,
  6. (1960). The Problem of Social Costs”, doi
  7. (1989). The World Trading System.M I TP r e s s ,C a m b r i d g eM a s -sachusetts,
  8. (1995). Trading Blocs and the Americas: The Natural, the Unnatural and the Super-natural.” doi
  9. (1998). Trading Preferentially: Theory and Policy.” doi

To submit an update or takedown request for this paper, please submit an Update/Correction/Removal Request.