economic determinants of free trade agreements abstract the purpose of this study is to provide the first systematic empirical analysis of the economic determinants of the formation of free trade agreements ftas and of the likelihood of ftas between pairs of countries using a qualitative choice model we develop this econometric model based upon a general equilibrium model of world trade with two factors of production two monopolistically competitive product markets and explicit intercontinental and intracontinental transportation costs among multiple countries on multiple continents the empirical model correctly predicts based solely upon economic characteristics 85 of the 286 ftas existing in 1996 among 1431 pairs of countries and 97 of the remaining 1145 pairs with no ftas

rationalizable conjectural equilibrium between nash and rationalizability abstract static equilibria can be viewed as steady states of recurring play of a game such steady states in which players do not perfectly observe the actions of others need not be nash equilibria this paper suggests a static solution concept rationalizable conjectural equilibrium that corresponds to such steady states to present it the basic model of a normal form game is enriched by specifying the signals that players get about others actions the solution is a profile of actions such that each player s action is optimal given that it is common knowledge that all players maximize utility given their signals journal of economic literature classification number c72

granting preferential market access in services sequentially versus jointly with goods while most trade agreements were about goods up until 2000 many countries have been and are now adopting services provisions they do so by adding them to prior goods only agreements or by concluding new agreements jointly for goods and services this paper shows that high unilateral services trade costs deter the likelihood of joint preferential liberalization of goods and services

non additive beliefs and strategic equilibria abstract this paper studies n player games where players beliefs about their opponents behaviour are modelled as non additive probabilities the concept of an equilibrium under uncertainty which is introduced in this paper extends the equilibrium notion of dow and werlang 1994 j econom theory 64 305 324 to n player games in strategic form existence of such an equilibrium is demonstrated under usual conditions for low degrees of ambiguity equilibria under uncertainty approximate nash equilibria at the other extreme with a low degree of confidence maximin equilibria appear finally robustness against a lack of confidence may be viewed as a refinement for nash equilibria journal of economic literature classification numbers c72 d81

services trade regulation and regional integration evidence from sectoral data we use new world bank services trade restrictiveness indices stris to measure the impact of regulation on cross border services trade at the sectoral level we find that policy barriers as measured by the overall stri for each sector have a negative and significant effect on total services trade as well as trade in business and financial services the effect in other sectors is not statistically significant however disaggregating the policy data by mode produces stronger results policy restrictiveness negatively impacts trade in all sectors except wholesale and retail trade there is thus considerable evidence of cross sectoral heterogeneity in the impact of regulations in addition we find evidence of cross modal substitution in total services trade but complementarity in business financial and insurance services finally we find that regional trade agreements tend to promote trade overall and in business and financial services however the effect seems to be primarily driven by the impact of the european union

learning and self confirming long run biases abstract we consider an ambiguity averse sophisticated decision maker facing a recurrent decision problem where information is generated endogenously in this context we study self confirming actions as the outcome of a process of active experimentation we provide inter alia a learning foundation for self confirming equilibrium with model uncertainty battigalli et al 2015 and we analyze the impact of changes in ambiguity attitudes on convergence to self confirming equilibria we identify conditions under which the set of self confirming equilibrium actions is invariant to changes in ambiguity attitudes and yet ambiguity aversion may affect the dynamics indeed we argue that ambiguity aversion tends to stifle experimentation increasing the likelihood that the decision maker gets stuck into suboptimal certainty traps

preferences dependent learning in the centipede game the persistence of mistrust abstract a candidate explanation for the persistence of heterogeneous behavior in a sequential social dilemma played many times is the existence of heterogeneous preferences preferences dependent conjectures about opponents behavior are an additional source of heterogeneity by behaving differently different preference types acquire different information thus when observing only outcomes of own past interactions heterogeneous and possibly wrong conjectures about opponents strategies may endogenously arise and persist in a centipede game experiment played for forty rounds we manipulate the type of ex post information and the method of play we find that when the game is played in its reduced normal form and subjects have only access to personal statistics heterogeneity of behavior across preference types persists in the long run in this case behavior resembles a self confirming equilibrium selfish subjects take at earlier nodes due to an unjustified lack of trust when subjects have also access to public statistics heterogeneity disappears selfish subjects tend to pass more often and play moves towards bayes nash equilibrium

economic determinants of the timing of preferential trade agreement formations and enlargements preferential trade agreements ptas have proliferated over the past 60 years while a small number of recent studies have examined empirically the economic determinants of the likelihood of a pair of countries having a pta this study explains empirically the timing of all pta formations and enlargements from 1950 through 2006 using duration analysis our main and novel goal is to predict in and out of sample a substantive share of these 1 560 pta events using a parsimonious model with mainly economic variables taking selection dynamics into account our analysis reveals that we can predict correctly in sample the actual year of entry into force for 26 of the 1 560 bilateral pta formations enlargements in the period 1950 2006 among 10 518 pairings of 146 countries using only a few economic and political variables moreover we can predict correctly in sample 57 of these pta events within a 10 year window leading up to the event using this model the model also performs well out of sample for the near term 82 but not if the out of sample period is very long we conclude with an evaluation of the model s ability to predict the timing of the north american free trade agreement the european union s formation and enlargements and the model s ten most likely post 2006 pta events jel f14 f15

transport energy in australia policy problems issues and alternatives abstract the thesis held by the australian government that the projected shortfall in indigenous crude oil supply can be met by enhanced exploration and or demand conservation is appraised in the light of current economic incentives for exploration and the motorist s sentiment towards demand conservation the paper establishes that the thesis is false and that australia is faced with a massive transport fuel import bill unless it finds alternative energy forms the paper identifies potential alternative transport fuels that could be made available from indigenous energy resources whatever alternative fuel is to be used it would need to conform to a variety of economic social are environmental criteria before it would be accepted the paper raises a set of general criteria with which to appraise various alternative transport fuels given that the use of petroleum products is environmentally degrading the various alternative transport fuels are primarily assessed on environmental criteria the paper finds that on environmental criteria only ethanol and natural gas have merit as suitable alternative fuels however with the addition of social and economic criteria it is natural gas which could provide a solution to the problem of the projected indigenous crude oil shortfall such a solution may in fact enhance the quality of life for australians especially those living in urban areas with deteriorating air quality

are policymakers ambiguity averse we investigate the ambiguity preferences of a unique sample of real life policymakers at the paris un climate conference cop21 we find that policymakers are generally ambiguity averse using a simple design we are moreover able to show that these preferences are not necessarily due to an irrational behaviour but rather to intrinsic preferences over unknown probabilities exploring the heterogeneity within our sample we also show that the country of origin and the degree of quantitative sophistication affect policymakers attitudes towards compound risk but not towards ambiguity robustness results are obtained in a lab experiment with a sample of university students

the erosion of colonial trade linkages after independence high trade between countries with colonial ties may be explained by government policies that establish preferential access or as a consequence of networks formed through social interactions using bilateral trade data from 1948 to 2003 we examine the eect of independence on post colonial trade the severing of formal colonial relations can lead to an immediate reduction in trade as preferential access is eliminated as well as a gradual reduction corresponding to the deterioration of trading networks our results reveal that independence reduces colonial trade with its colonizer metropole the reduction cumulates over a 30 year period and the disruption is particularly severe for hostile separations we also find that overall colonial trade falls subsequent to independence but to a lesser extent than trade with the metropole

a tale of two tails commuting and the fuel price response in driving abstract pricing greenhouse gases is widely understood as the most efficient approach for mitigating climate change yet distributional effects hamper political acceptance these distributional effects are especially important in transport the fastest growing sector for greenhouse gas emissions using rich data covering the entire population of vehicles and households in denmark this study uncovers an important feature of driving demand two groups of much more responsive households in the lower and upper tails of the work distance distribution we further estimate the causal effect of public transport a critical determinant of the upper tail and show how public transport access can both reconcile differences in fuel price elasticities between the united states and europe and considerably influence the distributional effects of fuel pricing

payoff information and self confirming equilibrium abstract in a self confirming equilibrium each player correctly forecasts the actions that opponents will take along the equilibrium path but may be mistaken about the way that opponents would respond to deviations this paper develops a refinement of self confirming equilibrium in which players use information about opponents payoffs in forming beliefs about the way that opponents play off of the equilibrium path we show that this concept is robust to payoff uncertainty we also discuss its relationship to other concepts and show that it is closely related to assuming almost common certainty of payoffs in an epistemic model with independent beliefs journal of economic literature classification numbers c72 d84

self confirming equilibrium rium path of play thus if a self confirming equilibrium occurs repeatedly no player ever observes play that contradicts his beliefs even though beliefs about play at off path information sets need not be correct we characterize the ways in which self confirming equilibria and nash equilibria can differ and provide conditions under which self con firming equilibria correspond to standard solution concepts nash equilibrium and its refinements describe a situation in which i each player s strategy is a best response to his beliefs about the play of his opponents and ii each player s beliefs about the opponents play are exactly correct we propose a new equilibrium concept self confirming equilibrium that weakens condition ii by requiring only that players beliefs are correct along the equilibrium path of play thus each player may have incorrect beliefs about how his opponents would play in contingencies that do not arise when play follows the equilibrium and moreover the beliefs of different players may be wrong in different ways the concept of self confirming equilibrium is motivated by the idea that noncooperative equilibria should be interpreted as the outcome of a learning process in which players revise their beliefs using their observations of previous play suppose that each time the game is played the players observe the actions chosen by their opponents but that players do not observe the actions their opponents would have played at the information sets that were not reached along the path of play then if a self confirming equilibrium occurs repeatedly no player ever observes play that contradicts his beliefs so the equilibrium is self confirming in the weak sense of not being inconsistent with the evidence by analogy with the literature on the bandit problem e g rothschild 1974 one might expect that a non nash self confirming equilibrium can be the outcome of plausible learning processes this point was made by fudenberg and

selfcon rming equilibrium and model uncertainty we propose to bring together two conceptually complementary ideas 1 selfcon rming equilibrium sce at rest points of learning dynamics in a game played recurrently agents best respond to con rmed beliefs i e beliefs consistent with the evidence they accumulated and 2 ambiguity aversion agents other things being equal prefer to bet on events with known rather than unknown probabilities and more generally distinguish objective from subjective uncertainty a behavioral trait captured by their ambiguity attitudes using as a workhorse the smooth ambiguity model of klibano marinacci and mukerji 2005 we provide a de nition of smooth sce which generalizes the traditional concept of fudenberg and levine 1993a b here called bayesian sce and admits waldean maxmin sce as a limit case we show that the set of equilibria expands as ambiguity aversion increases the intuition is simple by playing the same strategy in

strategic uncertainty and equilibrium selection in discontinuous games abstract we introduce the new concept of prudent equilibrium to model strategic uncertainty and prove it exists in large classes of discontinuous games when the game is better reply secure we show that prudent equilibrium refines nash equilibrium in contrast with the current literature we don t use probabilities to model players strategies and beliefs about other players strategies we provide examples first price auctions location game nash demand game etc where prudent equilibrium concept removes most non intuitive solutions of the game

policy barriers to international trade in services evidence from a new database surprisingly little is known about policies that affect international trade in services previous analyses have focused on policy commitments made by countries in international agreements but in many cases these commitments do not reflect actual policy this paper describes a new initiative to collect comparable information on trade policies for services from 103 countries across a range of service sectors and relevant modes of service delivery the resulting database reveals interesting policy patterns although public monopolies are now rare and few services markets are completely closed the authors observe numerous second generation restrictions on entry ownership and operations even in instances in which there is little explicit discrimination against foreign providers market access is often unpredictable because the allocation of new licenses remains opaque and highly discretionary in many countries across regions some of the fastest growing countries in asia and the oil rich gulf states have restrictive policies in services whereas some of the poorest countries are remarkably open across sectors professional and transportation services are among the most protected industries in both industrial and developing countries whereas retail telecommunications and even finance tend to be more open

the cinderella options a study of modernized renewable energy technologies part 1 a technical assessment abstract this paper examines the status of and prospects for renewable energy technologies it is argued that the prospects for obtaining large scale supplies are good especially in the industrialized countries and that sufficient evidence exists for them to be taken much more seriously in the energy policy process reasons for their low status include inadequate data and a scepticism born of past disappointments however a failure to transfer existing knowledge to the policy community and well documented institutional and psychological processes are probably more important a major change of attitudes is required and is in the long run inevitable but the process will not be easy together with energy efficiency and natural gas renewable sources will then emerge as the third leg of the triad which will lead the way out of the growing energy environmental impasse however the changes involved could either deepen or alleviate political conflicts a great deal will hinge upon the timing and path of the changes

nash equilibrium under knightian uncertainty breaking down backward induction abstract we define nash equilibrium for two person normal form games in the presence of knightian uncertainty using the formalization of schmeidler and gilboa we show that nash equilibrium exists for any degree of uncertainty aversion that maxmin behaviour can occur even when it is not rationalizable in the usual sense and that backward induction breaks down in the twice repeated prisoners dilemma we relate these results to the literature on cooperation in the finitely repeated prisoners dilemma and the literature on epistemological conditions underlying nash equilibrium the knowledge notion implicit in this model of equilibrium does not display logical omniscience journal of economic literature classification numbers c72 d81

subjective games and equilibria applying the concepts of nash bayesian and correlated equilibria to the analysis of strategic interaction requires that players possess objective knowledge of the game and opponents strategies such knowledge is often not available the proposed notions of subjective games and of subjective nash and correlated equilibria replace essential but unavailable objective knowledge by subjective assessments when playing a subjective game repeatedly subjective optimizers converge to a subjective equilibrium we apply this approach to some well known examples including single and multi person multi arm bandit games and repeated cournot oligopoly games journal of economic literature classification numbers c73 and c83

optimism and pessimism in games this paper considers the impact of ambiguity in strategic situations it extends the earlier literature by allowing for optimistic responses to ambiguity ambiguity is modelled by ceu preferences we propose a new solution concept for players who may express ambiguitypreference then we study comparative statics of changes in ambiguity attitude in games with strategic complements this gives a precise statement of the impact of ambiguity on economic behaviour

sequential two player games with ambiguity if players beliefs are strictly non additive the dempster shafer updating rule can be used to define beliefs off the equilibrium path we define an equilibrium concept in sequential two person games where players update their beliefs with the dempster shafer updating rule we show that in the limit as uncertainty tends to zero our equilibrium approximates bayesian nash equilibrium by imposing context dependent constraints on beliefs under uncertainty

behavioral equilibrium in economies with adverse selection i propose a new solution concept behavioral equilibrium to study environments with players who are naive in the sense that they fail to account for the informational content of other players actions a behavioral equilibrium requires that i players have no incentives to deviate given their beliefs about the consequences of deviating ii these beliefs are consistent with the information obtained from the actual equilibrium play of all players and iii when processing this information naive players fail to account for the correlation between other players actions and their own payouncertainty i apply the framework to certain adverse selection settings and show that contrary to the received literature the adverse selection problem is exacerbated when naive players fail to account for selection more generally the main distinguishing feature of the framework is that in equilibrium beliefs about both fundamentals and strategies are jointly restricted consequently whether a bias may arise or not is determined endogenously in equilibrium jel c72 d82 a large literature presents evidence that psychological and cognitive biases aect people s be havior this evidence raises some questions what are the eects of these biases and can they persist at all in economic settings where people strategically interact with each other and have the opportunity to learn from their experience 1 in this paper i introduce a game theoretic equilibrium framework to study these questions in the context of a particular bias people s failure to take into account the informational content of other people s actions i apply the framework to a class of games that arises naturally in adverse selection settings and then show that the adverse selection

irrationality and ambiguity in extensive games abstract based on a model where deviations from equilibrium play are assumed to identify irrational players who are characterized by ambiguous set valued strategies this paper introduces an equilibrium notion for extensive games with ambiguity averse players that yields a precise interpretation for the counterfactual reasoning usually associated with backward induction the resulting equilibria are always nash equilibria but may not satisfy the conditions required for various refinements of nash equilibrium including those for subgame perfection existence of such equilibria is proved for all two player games and for n player games with perfect information