the unbalanced uruguay round outcome the new areas in future wto negotiations the uruguay round involved a grand north south bargain the north reduced import barriers particularly in textiles and agriculture the south adopted new domestic regulations in such areas as services and intellectual property changes that would lead to increased purchases from the north in mercantilist economics apples for apples imports for imports in real economics apples for oranges the authors argue that while the north s reduction of import barriers benefits both the north and the south the new domestic regulations adopted by countries of the south could prove costly to those countries to begin with the regulations will be expensive to implement and while the cost side of their impact is secured by a legal obligation in the case of intellectual property rights for example the cost is higher prices for patented goods the benefits side is not so secured

ex ante or ex post competition policy a progress report abstract when intervening in markets say to block a merger competition authorities are constrained by the limited information they have about the social desirability of the available alternatives compared to ex ante control ex post control is based on the more accurate information that becomes available in the intervening period but entails temporary losses to social welfare and reversal costs incurred to unscramble the eggs through a toy model we identify situations in which the competition authority finds it optimal to commit to forego the option of ex post review in order to avoid chilling ex ante socially beneficial mergers on the other hand the case for ex post review is strengthened if post merger market conducts can signal the merged firm s private information about the consequences of the merger

legal principles in antitrust enforcement we study antitrust enforcement to channel price fixing incentives of cartels through setting fine schedules and detection levels fines obey legal principles punishments fit the crime proportionality bankruptcy considerations and minimum fines bankruptcy considerations limit maximum fines ensure abnormal cartel profits and impose a challenge for optimal antitrust enforcement we derive the fine schedule and detection level that are constrained optimal under legal principles and sustainability of cartel prices this fine schedule lies below the maximum fine makes collusion on lower prices more attractive than on higher prices and hence relates to marginal deterrence literature this article is protected by copyright all rights reserved

to reveal or not to reveal strategic disclosure of private information in negotiation abstract within the bargaining literature it is widely held that negotiators should never reveal information that will lead to disclosure of their reservation prices we analyze a simple bargaining and search model in which the informed buyer can choose to reveal his cost of searching for an outside price which determines his reservation price to the uninformed seller we demonstrate that buyers can be made better off by revealing their search cost more interestingly we also find that depending on the assumed distribution of search costs sometimes buyers with relatively low search costs should reveal their private information whereas in other cases buyers with relatively high search costs should do so we then test our model experimentally and find that subjects behavior is not entirely consistent with theoretical predictions in general bargainers behavior is better explained by a bounded rationality model similar to fictitious play

five hypotheses concerning the fate of the singapore issues in the doha round at the cancun ministerial conference the members of the world trade organization wto disagreed on whether to launch negotiations on multilateral disciplines concerning the four areas of government policy collectively known as the singapore issues this amounted to a decision not to expand the wto s boundaries along these dimensions in this paper five hypotheses concerning the treatment of the singapore issues by the wto s membership are described and assessed the implications of this assessment for the likelihood that at some future date similar proposals can be successfully advanced in the multilateral trade arena are also discussed

the value of trade agreements in the presence of political pressures an argument often heard in favor of trade agreements is that by committing to free trade a government can credibly distance itself from domestic lobbies but several existing models of endogenous protection suggest that governments have no interest in foreclosing interest group pressures since governments derive rents from the political process we develop a small country model in which factors are sector specific in the short run but mobile in the long run we show that in this setting a government may be worse off in the political equilibrium than under commitment to free trade and hence it may value a trade agreement

agricultural tariffs or subsidies which are more important for developing economies this article assesses the impact of the world price depressing effect of agricultural subsidies and border protection in organization for economic co operation and development oecd countries on developing economies exports imports and welfare developing economy exporters are likely to benefit from reductions in such subsidies and trade barriers whereas net importers may lose as world prices rise a simple partial equilibrium model of global trade in commodities that benefit from domestic support or export subsidies is developed to estimate the relevant elasticities simulation results suggest that a 50 percent reduction in border protection will have a much larger positive impact on developing economies exports and welfare than a 50 percent reduction in agricultural subsidies although there is significant heterogeneity across developing economies the results suggest that efforts in the doha round of world trade organization wto negotiations should be directed at substantially reducing border protection

legal uncertainty as a welfare enhancing screen consider legal uncertainty as uncertainty about the legality of a specific action in particular suppose that the threshold of legality is uncertain i show that this legal uncertainty raises welfare legal uncertainty changes deterrence in opposite directions the probability of conviction increases for firms below the threshold while the probability of conviction decreases for firms above the threshold hence legal uncertainty acts as a welfare enhancing screen and increases welfare legal uncertainty discourages some actions with low private benefits while it encourages other actions with high private benefits

implementation and imbalance dealing with hangover from the uruguay round the uruguay round agreements impose bound obligations to implement but provide only unbound promises of assistance is there a legal solution within the wto legal system i e can implementation assistance be made a legal obligation the author concludes that the doha negotiations on trade facilitation and on aid for trade demonstrate that such a legal arrangement cannot be constructed this is not however a problem the international community has provided extensive trade related assistance through bilateral and multilateral development agencies regarding the overall uruguay round imbalance developing countries gave more than they got failure of the international community to acknowledge that the imbalance stems in major part from the wto agreement on intellectual property trips has retarded a general making up

optimal cartel pricing in the presence of an antitrust authority the dynamic behavior of a price fixing cartel is explored when it is concerned about creating suspicions that a cartel has formed consistent with preceding static theories the cartel s steady state price is decreasing in the damage multiple and the probability of detection however contrary to those theories it is independent of the level of fixed fines it is also shown that the cartel prices higher when a more competitive benchmark price is used in calculating damages

the role of external search in bilateral bargaining we consider the problem of bargaining between two individuals who can also search for possible alternatives to each other s offers we explicitly incorporate the search activity into the process of bargaining a disagreement in bargaining will lead each individual to search for an outside offer in the hope of improving his future bargaining position and attaining a more favorable outcome we model the interlaced phases of bargaining and search over time as an extensive noncooperative game we characterize the associated subgame perfect equilibrium outcome and strategies finally we show that superior search ability yields an individual a more favorable outcome and hence represents a greater bargaining strength

optimal antitrust policy under different regimes of fines abstract this paper shows how antitrust laws against price fixing can be enforced efficiently in the presence of asymmetric information between the authorities and the industry and under different regimes of pecuniary punishment we consider two regimes of fines that are often used in practice the first involves a fine based on revenues of the industry while the second is related to the damage caused to consumers the analysis shows that since investigation is costly it is optimal from a welfare point of view to tolerate some degree of collusion in both cases comparing the deterrence levels we show that no regime is a priori better than the other in addition we show that for industries where the possibilities of collusion are small the first system dominates the second in terms of efficiency conversely for high possibilities of collusion the second system is better

coherence and the wto coherence between the wto and the bretton woods institutions a formal wto objective has achieved some minor goals but has been expensive in terms of direct costs and inefficiencies in policy making and policy debate the so called integrated framework has achieved relatively little and aid for trade has yet to be fully established there is little role for the wto in development and aid policy other than its traditional job of facilitating trade growth and so its role in aid for trade is unclear coherence especially when interpreted as allowing developing countries to avoid trade liberalization in the name of development has confused and weakened the doha round of wto negotiations

bargaining and search with recall a two period model with complete information two standard results of previous bargaining models state that delay is generally not expected to occur under complete information and bargaining outcome depends crucially on the bargainers intrinsic characteristics that determine their reservation prices and in general bargainers with better reservation prices tend to get better outcomes this paper considers a bilateral bargaining problem with complete information in which one of the bargainers the buyer is allowed to search while bargaining more importantly we assume that the buyer is allowed to recall past outside offers we find that quite contrary to the standard results of previous complete information bargaining models complete information renders no guarantee for immediate resolution of bargaining and the effect of changing the buyer s search cost on each player s bargaining outcome is unpredictable the major driving force of these two results is the assumption that the buyer can recall past outside offers

why should trade negotiators negotiate about in recent years there have been growing demands to make trade liberalization contingent on adoption of common labor and environmental standards the straightforward economic answer is that this makes little sense neither the gains from trade nor the gains from appropriate regulation are compromised if other countries impose standards that are weaker than your own it is possible to offer second bet economic rationales for harmonization but these are empirically unconvincing the only serious argument in favor or regulation is political that regulation which is in the national interest may not be politically feasible unless other countries do the same

fight fold or settle modelling the reaction to ftc merger challenges i introduction scholars studying law and economics have identified four stages through which every legal dispute moves the first stage involves an alleged injury which leads to the legal dispute second the injured party decides whether to advance a claim once a claim is advanced the plaintiff and defendant may negotiate to settle the claim if the negotiation fails the dispute moves to litigation by subdividing the legal process into these four stages it is possible to study the interaction at any one stage in greater detail this paper models the third stage of this process in an antitrust setting the interaction between the federal trade commission ftc and private parties interested in consummating horizontal mergers that may adversely affect competition the ftc must decide whether to advance a claim against the merger and seek to block the transaction if such a claim is made the merging parties may fight forcing a resolution of the dispute through litigation by moving forward with the transaction they may also fold abandoning the transaction or settle entering into an agreement with the government to resolve the issues underlying the merger challenge this decision to fight fold or settle is somewhat more complicated than the standard settle or litigate question because the prospective nature of the alleged competitive injury gives the defendant an opportunity to abandon the transaction before the injury occurs our basic hypotheses with respect to this process are that firms decisions depend not only on the competitive merits of the ftc s case but perhaps more importantly on the political conglomerate and financial nature of the relevant transaction and how the nature of the case fits into the merger review process section ii presents the background for the analysis by discussing the institutional structure of the ftc explaining the merger review process and then presenting an overview of a firm s options when faced with a decision by the ftc to block a merger section iii models the decision faced by firms defines the equations to be estimated and surveys the data set of ftc merger challenges a multinomial logit model of a firm s fight fold or settle decision is estimated in section iv followed by an interpretation of the results and an application of the model using both historical data and information from mergers proposed during fiscal 1992 and 1993 we find that the level of the competitive overlap associated with the relevant transaction is an important determinant of firms fight fold or settle decisions in particular if the competitive overlap involves a small percentage of the transaction firms generally prefer to reach a negotiated settlement with the commission in such cases the settlement decision appears unaffected by the underlying merits of the ftc s legal position in other cases the merits of the case may play a role in the firm s litigation decision we also find that the potential efficiencies offered by the merger affect the firms decision making process with firms more likely to fight and less likely to settle if the merger is expected to generate efficiencies ii issues in merger enforcement background on the federal trade commission the ftc is a government agency charged along with the antitrust division of the department of justice with enforcing the antitrust laws much of the antitrust casework involves the evaluation of the competitive effects of proposed horizontal mergers 1 to interdict a proposed merger the ftc must obtain a preliminary injunction from a federal district court with possible review from the relevant court of appeals if the court declines to issue the injunction the firms are free to merge though the ftc can initiate a lengthy court process to attempt to obtain a permanent injunction against the merger commission decisions are made by a majority vote of the five commissioners each of whom are appointed by the president and confirmed by the senate for terms of up to seven years

antitrust enforcement under asymmetric information optimal antitrust policy toward collusion to fix prices is examined in an asymmetric information setting the antitrust authority does not know cartel costs and so cannot distinguish between a high cost competitive industry and a low cost cartel the problem differs from principal agent models since firms can choose competitive or collusive behavior with costly enforcement the authority is shown to commit itself to a schedule of probabilities of bringing suit that depends on the observed market price collusive firms moderate markups to reduce the risk of being prosecuted copyright 1989 by royal economic society

horizontal concentration and european merger policy in the second section of this policy paper the main theoretical arguments concerning the costs and benefits of horizontal mergers as a way of modifying market conditions are identified as well as the exploration of some indicators that could be used to evaluate the probability of these costs and benefits in a european context

why is it so difficult trade liberalization under the doha agenda many explanations have been offered for the current difficulties of the world trade organization wto in fact the system appears to have managed many of these challenges reasonably well including the increase in the number of members its mediaeval decision making procedures the changing geopolitical environment the rapid growth of preferential trade arrangements ptas the complexity of its agreements and concerns about erosion of unilateral preferences by contrast the near exhaustion of the traditional fuel of industrial country non agricultural tariffs the increasing importance of non trade concerns and incomplete adjustment to a new multi polar negotiating system appear to be important factors requiring further examination

the role of international and national agencies in trade related capacity building with increased recognition that trade can bring significant benefits to developing countries and the launch of a new trade round bilateral and multilateral agencies have begun to mobilise resources for trade related capacity building trcb the biggest challenge is to ensure that available resources are effectively utilised to deliver tangible benefits to developing countries this paper argues that the effective delivery of trcb relates specifically to two areas in country to help formulate appropriate trade positions as well as to place trade reform in the context of the country s overall development strategy that will promote a supply response and facilitate pro poor growth and secondly within the global rule making process to ensure that implementation of wto rules and efforts to negotiate and implement future disciplines makes sense from a development perspective and that trcb is considered in the context of other competing development needs the paper elaborates an issues based approach to bring the main providers to trcb and bilateral donors together to support recipient countries to include a trade agenda in their overall development strategy and to facilitate developing country participation and implementation of wto agreements that could be formulated within the global trade rules

an approximate solution to rent seeking contests with private information abstract we propose an approximate solution to rent seeking contests in which participants have heterogeneous and private valuations the procedure only requires common knowledge about the mean of the distribution of valuations we obtain a closed form expression for an agent s level of investment and subject it to comparative statics analysis we then assess the performance of the model and find that the proposed solution provides a remarkably effective approximation of the optimal solution for a wide range of parameter specifications

aid and trade this paper surveys the recent theoretical and empirical literature that explores the relations between aid and trade and asks about the complementarity or substitution effects at work we distinguish between the effects of aid on trade flows and on trade policies of the donor as well as the recipient countries special focus is given on trade facilitation or aid for trade

competition cooperation and mergers economic and policy issues abstract this paper contrasts two types of european community competition policies with respect to joint ventures namely concentrative joint ventures ccjv which fall under the merger control regulation and cooperative joint ventures cpjv which fall under article 85 1 the contrast occurs at different levels procedural jurisdictional and substantive it provides firms with bargains and trade off opportunities for the choice of the more convenient jurisdiction for their transactions the paper presents a model illustrating how these bargains and trade offs can operate in the context of an endogenous choice between a ccjv and a cpjv

multilateral trade cooperation what next this paper first briefly describes the role of the wto and its history it then lays out a simple bargaining model of international negotiations which can be used for understanding the doha round of talks this simple framework is used to distil and discuss a number of potential explanations for the difficulties that have arisen in concluding these talks as well as a number of systemic questions that confront wto members a key question is whether the wto should concentrate primarily on market access or on further expanding its coverage to deal with regulatory issues or with other domestic policies that may have an impact on trade given the difficulties that arise in agreeing on behind the border disciplines we argue that a continued focus on market access and enforcement of market access commitments is likely to prove most fruitful

liberalising temporary movement of natural persons an agenda for the development round we discuss liberalising the temporary mobility of workers under mode 4 of the gats particularly the movement of medium and low skilled service providers between developing and developed countries such mobility potentially offers huge returns a flow equivalent to three per cent of developed countries skilled and unskilled work forces would generate an estimated increase in world welfare of over us 150 billion shared fairly equally between developing and developed countries the larger part of this emanates from the less skilled essentially because losing higher skilled workers cuts output in developing countries severely the mass migration of less skilled workers raises fears in developed countries for cultural identity problems of assimilation and the drain on the public purse these fears are hardly relevant to temporary movement however the biggest economic concern from temporary mobility is its competitive challenge to local less skilled workers but as populations age and the average levels of training and education rise developed countries will face an increasing scarcity of less skilled labour temporary mobility thus actually offers a strong communality of interest between developing and developed countries the remainder of the paper looks at the gats provisions on mode 4 and the commitments that have been made under it the paper reviews several official proposals for the doha talks including the very detailed one from india and considers several countries existing schemes for the temporary movement of foreign workers many countries have long had bilateral foreign worker programmes and some regional agreements provide for liberal and flexible movement these show what is feasible and how concerns can be overcome we caution that to be useful any wto agreement must increase mobility not just bureaucratise it the paper concludes with some modest and practical proposals we suggest inter alia that licensing firms to arrange the movement of labour is the most promising short term approach to increasing temporary mobility

merger policy in open economies abstract we extend farrell and shapiro s 1990 analysis of horizontal mergers to the case of an open economy we show how the rules for approving a merger ought to be adapted to account for the fact that the regulator is only concerned with domestic welfare that is ignores the effect of the merger on foreign firms and consumers we also explore the consequences of this externality in a model of a single market which includes consumers and producers of different countries in particular we provide conditions under which a decentralized process of evaluating merger proposals a la farrell shapiro can survive the externality mentioned above

asymmetric responses in the timing and magnitude of changes in australian monthly petrol prices to daily oil price changes abstract this article investigates whether uncompetitive pricing tactics are being employed in the retail petrol market in australia through examining the effect of a change in daily oil prices on monthly petrol prices to do so we incorporate asymmetry into the coefficients of a normalised beta weighting function within an asymmetric mixed data sampling amidas framework this enables us to examine both the timing and the lagged marginal effects of a change in retail petrol prices in response to a change in the oil price we find evidence of asymmetries in both the timing and magnitude of retail petrol prices to a change in the oil price specifically we find that while price falls are slowly and symmetrically passed onto consumers price increases are more delayed but higher in intensity over time depending on the capital city when retailers eventually do increase petrol prices in response to an oil price rise with delay the price rise is between 2 1 and 3 4 times more than when retailers reduce petrol prices in response to a fall in the price of oil this finding is consistent with retailers delaying substantial petrol price rises in order to mask the existence of uncompetitive practices

developing countries in the wto system applying robert hudec s analysis to the doha round in his 1987 developing countries in the gatt system robert hudec concluded that the identity of developing countries in the gatt system was primarily a matter of their demanding non reciprocal and preferential treatment developed countries responding grudgingly to those demands and that this situation had been unfruitful either to support developing country reforms or to discipline developed country restrictions aimed at developing countries hudec was pessimistic about the relationship becoming more productive but his expression of despair offered a glimmer of hope there are those who believe that the gatt has become so committed to the current policy that the only way to change it would be to start a new organization a new organisation was started the world trade organization but has the wto achieved what hudec hoped a new organisation might at the 1987 95 uruguay round developing country leaders acted as hudec had hoped they used international rules and bindings as leverage to support their own internally driven reforms to overcome generations of accumulated protection to lock in reforms against the backsliding that had undone previous reforms dealing with the uruguay round s unbalanced outcome and the overlapping implementation problem have shaped the doha round but the negotiations have misconceived and mismanaged both issues rather than seeking to identify their real economics the negotiations have gone back to the traditional idea of special and differential treatment perhaps the largest cost of this mismanagement is that in many developing countries the unilateral momentum for liberalisation has waned to the extent that the doha negotiations have drawn attention away from the domestic issues that were the basis of developing country liberalisation and enhanced the status of negotiators relative to the leaders who fought at home for reform they have contributed to that waning

cartel pricing dynamics in the presence of an antitrust authority cartel pricing is characterized when firms are concerned about creating suspicions that a cartel has formed balancing concerns about maintaining the stability of the cartel with those of avoiding detection the cartel may either i gradually raise price to its steady state level or ii gradually raise price and then have it decline to its steady state level antitrust laws may have a perverse effect as they make cartel stability easier and thus allow for higher cartel prices

non discriminatory discrimination special and differential treatment under the gatt for developing countries developing countries have long been strong supporters of a non discriminatory rule based multilateral system on the grounds that as economically small units they would otherwise be subject to bilateral pressure from larger powers at the same time they have equally been committed to special and differential s d treatment for themselves under gatt rules their approach has been to argue that trade problems of developing countries are special from those of developed countries balance of payments problems viewed by them as endemic to low income countries make liberalisation difficult and import substitution strategies suggest that liberalisation is anyway undesirable poor export prospects export pessimism imply they need different treatment from developed countries in order to grow that is trade preferences in developed country markets special and differential also became a bloc wide strategy jointly pursued reflecting the premise that developing countries are jointly and simultaneously special and differential in their trade problems this is however changing in the uruguay round developing countries have shown themselves remarkably adept at moving away from the earlier somewhat passive bloc wide s d approach in a surprising range of negotiating groups countries have actively pursued country over bloc wide interests and in an active way involving a willingness to take on new gatt disciplines while s d is far from having been abandoned as a principle of the trading system the approach seems to be one of protecting and preserving what is there rather than pushing for further enhancement the reasons for these changes are as always multi faceted strong growth performance in the more outward oriented developing countries korea and other nics has weakened the intellectual commitment to import substitution what exactly s d has yielded developing countries in concrete trade policy terms has also been queried and over the years the differences between developing countries large small middle income least developed industrialised commodity exports agricultural importers exporters and others have grown to the point that in the uruguay round a grand coalition of all developing countries does not exist in any active sense

looking behind the curtain effects from modernization of european union competition policy abstract the european commission issued a proposal for reform of some aspects of communitary competition policy in particular proposes a shift from ex ante control notification system to an ex post control regime of agreements or decisions conflicting with article 81 ex article 85 we highlight the expected effects of this shift on the type of agreements that firms will implement the type of agreements has been taken as exogenous in most analysis of the reform proposal we contend that significant economic effects may result from recognizing the endogeneity of agreements we predict that the proposed reform will result in general in firms implementing less restrictive agreements

bargaining and search with incomplete information about outside options abstract this paper considers a model of bargaining in which the seller makes offers and the buyer can search at a cost for an outside option the outside option cannot be credibly communicated and the seller s offer is recallable by the buyer for one period there are essentially two equilibrium regimes for sufficiently high search cost the game ends immediately otherwise the search occurs in equilibrium compared to the case where the buyer can communicate his outside option the seller is worse off and the game results in search for a smaller set of values of the search cost i e less equilibrium delay c72

european competition policy modernization from notifications to legal exception council regulation ec 1 2003 came into force in may 2004 and replaced the mandatory notification of agreements by a regime of ex post monitoring this paper shows that ex post monitoring is the optimal audit regime when the competition authority s probability of error is low on the other hand the notification system becomes optimal when the competition authority s probability of error is high the paper also shows that block exemptions and black list regimes of per se il legality should be implemented when the agreements expected welfare impact is very high and very low respectively

the political economy of services trade liberalization a case for international regulatory cooperation little progress has been made since the creation of the wto on expanding and deepening the coverage of services liberalization commitments this paper identifies and discusses five hypotheses that may explain the absence of dynamism i technological changes allowing ever more services to be traded cross border unaffected by policy ii strong incentives to pursue liberalization on an autonomous basis unilaterally iii perceptions that bilateral or regional cooperation are a good substitute for the wto iv standard political economy factors such as adjustment costs and resistance by incumbents to erosion of rents and v concerns that the wto will affect the ability of regulators to enforce national norms we argue that all of these explanations play a role and that some of these factors significantly impede the scope for reciprocal exchanges of concessions the engine of wto negotiations copyright the author 2007 published by oxford university press

balance of payments and related issues in the uruguay round of trade negotiations little attention has been paid to the balance of payments provisions of the general agreement on tariffs trade gatt despite the fact that they directly influence the trade policies of the developing countries this article suggests that there is a need to reconsider these provisions in the context of the ongoing uruguay round of multilateral trade negotiations the article traces the historical evolution of gatt practices on trade restrictions for balance of payments purposes with the general introduction of more flexible exchange rate arrangements the original rationale for temporary barriers to safeguard a country s external financial position appears to have lost its force recent theoretical and empirical work has demonstrated that neutral or export promoting trade strategies are more effective for development than the import substitution frequently advocated by economists in the 1950s and 1960s the current debt problems of developing countries strengthen the argument for a relatively open trade and payments regime to attain balance of payments viability the article suggests that stronger international discipline over trade restrictions for balance of payments purposes would contribute to and presuppose other necessary improvements in the multilateral trading system which are already on the agenda of the uruguay round

trade adjustment in the wto system are more safeguards the answer for countries to engage successfully in the international trading system their industries firms and workers must respond continually to new conditions of competition the continuing need to adjust arises both from policy changes approved in multilateral negotiations e g implementation of trade liberalization commitments preference erosion or adverse terms of trade consequences of export subsidy elimination and from ongoing changes in competitive pressures inherent in a liberal trading system e g effects on comparative advantage of changes in technology or factor supplies but the political response to a situation calling for adjustment is often a call for safeguards whether as an ex ante provision in negotiated agreements or as an ex post measure once the agreement has been signed and the reality of new conditions takes shape this paper examines the range of adjustment problems confronting the current and future international trading system the economic arguments for intervention to deal with these problems the adjustment environment as set out in the current world trade organization wto agreements and proposals for reform while the adjustment problems we discuss apply to both rich and poor wto member countries we highlight the issues of adjustment especially relevant for developing countries

subgame perfect punishment for repeat offenders i introduction the literature on optimal law enforcement typically assumes that the government can commit to sanction schemes 1 this means the government can use any set of threats to penalize wrongdoers in particular if a crime occurs the government actually sanctions the wrongdoers even though ex post it may have no incentive to do so potential wrongdoers believe that the government will carry out the threat at any cost and therefore do not engage in the act in the first place in this article i give up the assumption that the government can commit to whatever sanction scheme i consider the analysis of optimal sanctions without the possibility to commit important because judges often have a lot of discretion as to the size of the penalty they may for example adjust sanctions to the financial possibilities age education and so on of the wrongdoer accordingly i allow only for sanctions that the government actually wishes to implement should a crime have occurred ruling out full commitment changes the optimal enforcement schemes suppose for example the government does not care about the sanction as is typically assumed in the literature then it will not enforce the penalty if a crime has happened given that there is say a small cost of doing so the rational criminal will anticipate the ex post enforcement behavior of the government therefore she will commit the crime because the threat of being sanctioned is not credible once one drops the commitment assumption the typical deterrence equilibria of the law enforcement literature between potential wrongdoers and the government are based on empty threats in the language of game theory the equilibria are not subgame perfect or time consistent i study the problem of subgame perfect sanctions using the framework of emons 2003 agents may commit a crime twice the act is inefficient the agents are thus to be deterred the agents are wealth constrained so that increasing the fine for the first offense means a reduction in the possible sanction for the second offense and vice versa the agents may follow history dependent strategies that is commit the crime a second time if and only if they were were not apprehended the first time the government seeks to minimize the probability of apprehension ignoring the government s commitment problem it is optimal to set the sanction for the first offense equal to the entire wealth of the agents while the sanction for the second offense equals zero the intuition is as follows a money penalty imposed for the second offense reduces the amount a person can pay for the first offense because the wealth available to pay penalties is assumed to be fixed over the two periods for that reason a higher probability event namely a first offense that is detected will be more effective use of the scarce money penalty resource than a lower probability event namely a second detected offense why is the probability of detection lower for the second rather than for the first crime simply because an agent faces the possibility of being sanctioned for the second crime if and only if he or she has already been sanctioned the first time for further results it is important to note that the optimal probability of apprehension increases with the benefit from the crimes this decreasing sanction scheme raises of course the issue of time consistency will the government really charge the agent the entire wealth when she was apprehended for the first crime knowing that then she will commit the second act for sure isn t it better for the government to renege and charge little for the first act so that the agent still has sufficient wealth to pay a sanction that deters the second crime given that the first act has been committed anyway that way the government can at least deter the second act to study this problem i consider a rent seeking government

regional free trade areas sorting out the tangled spaghetti as a result of the difficulties in negotiating the liberalization of trade globally countries seek liberalization among smaller groups we describe open regionalism as one such attempt to do this and show why after a decade of success it ran into the ground as a strategy the formation of discriminatory regional free trade areas ftas is sometimes seen as another response to this problem this paper point outs what is wrong with this response that it distorts trade patterns and thereby sets up an unpleasant prisoner s dilemma and suggests some ways forward we propose the formation of open trading arrangements otas and the establishment of a trade transparency commission in each country that is participating in an ota we also suggest global regulation of trade diversions caused by all ftas whether otas or not ultimately the return to health of the global trading system will require expanded understanding of the basic insight of economics that liberalization enhances the welfare of citizens of the liberalizing country

compulsory or voluntary pre merger notification theory and some evidence abstract we compare the prevailing system of compulsory pre merger notification with the australian system of voluntary pre merger notification it is shown that for a non trivial set of parameter values a perfect bayesian equilibrium exists in mixed strategies in which the regulator investigates un notified mergers with probability less than one and the parties choose notification with probability less than one thanks to the signaling opportunity that arises when notification is voluntary voluntary notification leads to lower enforcement costs for the regulator and lower notification costs for the merging parties some of the theoretical predictions are supported by exploratory empirical tests using merger data from australia overall our results suggest that voluntary merger notification may achieve objectives similar to those achieved by compulsory systems at lower costs to the merging parties as well as to the regulator