modelling the fiscal reaction functions of the gips based on state varying thresholds we introduce non linear fiscal reaction functions with endogenously estimated state varying thresholds to capture the behaviour of fiscal policy authorities during good and bad times these thresholds vary with the level of debt the economic cycle and a financial pressure index

bargaining in the shadow of power abstract often a bargainer can use some form of power legal military or political to impose a settlement how does the outside option of being able to impose a settlement albeit at some cost affect the bargaining and how does the probability that the bargaining will break down vary with the distribution of power between the bargainers these questions are examined by adding the option of imposing a settlement to rubinstein s game of dividing a pie each actor can accept an offer make a counteroffer or try to impose a solution imposing a settlement is however costly and each bargainer has private information about its cost journal of economic literatureclassification number c72

uncertainty risk and the financial crisis of 2008 the distinction between uncertainty and risk originally drawn by frank knight and john maynard keynes in the 1920s remains fundamentally important today in the presence of uncertainty market actors and economic policy makers substitute other methods of decision making for rational calculation specifically actors decisions are rooted in social conventions drawing from innovations in financial markets and deliberations among top american monetary authorities in the years before the 2008 crisis we show how economic actors and policy makers live in worlds of risk and uncertainty in that world social conventions deserve much greater attention than conventional ipe analyses accords them such conventions must be part of our toolkit as we seek to understand the preferences and strategies of economic and political actors

international evidence on fiscal solvency is fiscal policy responsible abstract we conduct a cross country empirical analysis of fiscal solvency based on dynamic stochastic general equilibrium conditions the results show evidence of fiscal solvency in the form of a robust positive conditional response of the primary balance to changes in public debt in panels for emerging and industrial economies and in a combined panel emerging economies show a stronger response and hence converge to lower mean debt output ratios as observed in the data the results are weaker for countries with debt ratios exceeding panel means and medians hence we can separate countries where fiscal solvency holds from those where it remains in doubt

the war of attrition in continuous time with complete information this paper provides a complete characterization of the nash equilibrium outcomes for the war of attrition when time is continuous and information is complete it allows for asymmetric payoffs and an arbitrary time horizon in addition to certain asymme tric pure strategy equilibria that always exist the authors establi sh the conditions under which there is also a continuum of mixed strategy equilibria these are most likely to exist when either the horizon is infinite or the game is symmetric copyright 1988 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

an exclusive country club the effects of the gatt on trade 1950 94 using data on bilateral trade flows from both before and after world war ii this article examines the impact of the general agreement on tariffs and trade on trade between its members and on the system of interwar trade blocs it shows that the distribution of the benefits produced by the gatt was much more highly skewed than conventional wisdom assumes the article also shows that the gold commonwealth reichsmark and exchange control blocs exerted positive and significant effects on trade after 1945 the authors attribute these effects to the bargaining protocol that governed successive rounds of gatt negotiations the signature element of the postwar trade regime

bargaining in legislatures bargaining in legislatures is conducted according to formal rules specifying who may make proposals and how they will be decided legislative outcomes depend on those rules and on the structure of the legislature although the social choice literature provides theories about voting equilibria it does not endogenize the formation of the agenda on which the voting is based and rarely takes into account the institutional structure found in legislatures in our theory members of the legislature act noncooperatively in choosing strategies to serve their own districts explicitly taking into account the strategies members adopt in response to the sequential nature of proposal making and voting the model permits the characterization of a legislative equilibrium reflecting the structure of the legislature and also allows consideration of the choice of elements of that structure in a context in which the standard institution free model of social choice theory yields no equilibrium

financial market activity under capital controls lessons from extreme events abstract we investigate the contemporaneous relation between return and transaction volume in distribution tails under the restrictions on transactions due to the capital controls implemented on the athens stock exchange in july 2015 we use bivariate extreme value theory to model the tail dependence structure we show that restrictions on transactions have an impact on the activity of market participants

foundations of dynamic monopoly and the coase conjecture subgame perfect equilibria are characterized for a market in which the seller quotes a price each period assume zero costs positive interest rate continuum of buyers and some technical conditions if buyers valuations are positive then equilibrium is unique buyers strategies are stationary and the price sequence is determinant along the equilibrium path but possibly randomized elsewhere otherwise a continuum of stationary equilibria can exist but at most one with analytic strategies coase s conjecture is verified for stationary strategies reducing the period length drives all prices to zero or the least valuation connections to bargaining models are described journal qf economic literature classification

chasing phantoms the political economy of ustr trade barriers though usually considered welfare reducing are globally ubiquitous in light of the enormous clash between what is and what ought to be researchers have begun addressing the question of why countries so consistently pursue such apparently counterproductive policies

the sterling dollar franc triangle monetary diplomacy 1929 1937 the late interwar years encompass a full spectrum of international monetary conflict and cooperation why did great britain france and the united states cooperate in some periods and not in others first the transience of monetary cooperation and conflict is explained in part by inherent characteristics of gold exchange and floating monetary systems second environmental changes swings between prosperity and depression between peace and the threat of war and between monetary orthodoxy and inflationist heresy altered the strategic setting confronting the central monetary powers third the actions of governments both followed from and shaped the circumstances that they confronted through strategies of composition across issues and decomposition across time and actors nations deliberately fostered the emergence of cooperation by altering the context of monetary diplomacy

the principle of convergence in wartime negotiations if war results from disagreement about relative strength then it ends when opponents learn enough about each other learning occurs when information is revealed by strategically manipulable negotiation behavior and nonmanipulable battlefield outcomes i present a model of simultaneous bargaining and fighting where both players can make offers and asymmetric information exists about the distribution of power in the markov perfect sequential equilibrium making and rejecting offers has informational value that outweighs the one provided by the battlefield however states use both sources of information to learn and settle before military victory the principle of convergence posits that warfare ceases to be useful when it loses its informational content and that belief in defeat victory is not necessary to terminate initiate hostilities thus the standard puzzle in international relations that seeks to account for prewar optimism on both sides may not be that relevant

reciprocity in trade the utility of a bargaining strategy recent works in international relations theory have focused on the value of reciprocity as a means of achieving cooperation in international politics they argue that even in an anarchic setting in which self help typifies the behavior of sovereign nation states the strategy of matching comparable responses to the actions of other nations may educate them over time to cooperate this article empirically confirms that this assumption is correct it examines the use of flexible reciprocal bargaining strategies between the united states and its major trading partners in key sectors in which surplus capacity and domestic adjustment difficulties have made commercial conflicts apparent the outcomes of most of the disputes demonstrate that reciprocity is an effective means of eliciting cooperation from trading partners results also illustrate that this cooperation is usually consistent with the general agreement on tariffs and trade gatt norms of liberal trade and dispute settlement even when it is inconsistent with the gatt principle of nondiscrimination

strategic delay in bargaining with two sided uncertainty the role of strategic delay is analyzed in an infinite horizon alternating offer model of bargaining a buyer and seller are engaged in the trade of a single object both bargainers have private information about their own preferences and are impatient in that delaying agreement is costly an equilibrium is constructed in which the bargainers signal the strength of their bargaining positions by delaying prior to making an offer a bargainer expecting large gains from trade is more impatient than one expecting small gains and hence makes concessions earlier on trade occurs whever gains from trade exist but due to the private information only after costly delay panmunjom korea upi the american general and the north korean general glared at each other across the table and the only sound was the wind howling across the barren hills outside their hut maj gen james b knapp negotiator for the united nations command unc was waiting for maj gen ri choonsun of the democratic people s republic of north korea to propose a recess they sat there arms folded for 42 hours not a word finally gen ri got up walked out and drove away evening bulletin philadelphia 11 april 1969

coordination and collaboration regimes in an anarchic world the study of regimes can contribute to our understanding of international politics only if regimes represent more than international organizations and less than all international relations the conceptualization of regimes developed here accepts the realist image of international politics in which autonomous self interested states interact in an anarchic environment yet there are situations in which rational actors have an incentive to eschew unconstrained independent decision making situations in which individualistic self interested calculation leads them to prefer joint decision making regimes because independent self interested behavior can result in undesirable or suboptimal outcomes these situations are labeled dilemmas of common interests and dilemmas of common aversions to deal with these states must collaborate with one another or coordinate their behavior respectively thus there are different bases for regimes which give rise to regimes with different characteristics coordination is self enforcing and can be reached through the use of conventions collaboration is more formalized and requires mechanisms both to monitor potential cheating and to insure compliance with the regime the article elucidates the assumptions of such an interest based approach to regimes assimilates alternative explanations into this framework and develops the implications for regime maintenance and change

government solvency and financial markets dynamic panel estimates for the european monetary union abstract we assess government solvency in the european monetary union emu controlling for the interaction of fiscal policy with financial markets we find a positive interaction reflecting market based pressures for fiscal improvement and significant debt stabilization efforts weakened in the post emu era

bargaining enforcement and international cooperation neoliberals and their neorealist critics have debated the relative importance of two main obstacles to international cooperation problems of cheating and enforcement and problems of relative gains by contrast i argue that problems of international cooperation have a common strategic structure in which a third distinct obstacle plays a crucial role almost regardless of the issue area states must first resolve the bargaining problem of agreeing on terms before they can implement and begin to enforce an agreement furthermore the bargaining and enforcement problems interact using a game model i show that if states must bargain to determine the deal to be enforced the shadow of the future cuts two ways a high expectation of continued interactions may make enforcing the agreement easier but it can also give states an incentive to bargain harder delaying agreement in hopes of getting a better deal empirical evidence from trade and arms control negotiations suggests that this mechanism may help to explain the costly standoffs that are often observed in international politics and are problematic for received neoliberal theories

interests power and multilateralism multilateralism characterizes to varying degrees patterns of interaction among states and the formal organizations they construct the utility of multilateral norms or organizations varies with the type of cooperation problem states confront thus the functional logic of international cooperation leads to hypotheses about the conditions under which the institution of multilateralism may be a feasible and efficient solution as in coordination problems and those under which it will not as in collaboration problems within these constraints powerful states choose institutions that will serve their interests with multilateral arrangements becoming more attractive as the future is valued more highly multilateral institutions should be stable in circumstances of changing distributions of power relative to more hierarchical institutions the vulnerability of patterns of international cooperation to various exogenous changes depends on the type of strategic interaction underlying state behavior

does flexibility promote cooperation an application to the global trade regime do flexibility provisions in international agreements clauses allow ing for legal suspension of concessions without abrogating the treaty promote coop eration recent work emphasizes that provisions for relaxing treaty commitments can ironically make states more likely to form agreements and make deeper conces sions when doing so this argument has particularly been applied to the global trade regime the general agreement on tariffs and trade gatt and its successor the world trade organization wto yet the field has not produced much evidence bearing on this claim our article applies this claim to the global trade regime and its chief flexibility provision antidumping in contrast to prior work this article explic itly models the endogeneity and selection processes envisioned by the theory we find that states joining the wto are more likely to adopt domestic antidumping mech anisms likewise corrected for endogeneity states able to take advantage of the regime s principal flexibility provision by having a domestic antidumping mecha nism in place are significantly more likely to 1 join the wto 2 agree to more tightly binding tariff commitments and 3 implement lower applied tariffs as well

rewarding impatience revisited a response to goodrich in rewarding impatience a bargaining and enforcement model of opec international organization spring 2004 i presented a theoretical model that suggested that in strategic situations where a bargaining phase is followed by an enforcement phase that resembles a prisoners dilemma impatient actors earned better outcomes than their more patient rivals i also modeled the division of cartel profits in the organization of petroleum exporting countries opec particularly with regard to the relationship between bargaining strength and disparate time horizons and found that there is some threshold level for which states that discount the future more heavily tend to receive better production offers than those that do not the critique presented in goodrich deals with the final section of the article which presents the results of statistical analysis testing the implications of these theoretical models i am grateful to jeff lewis drew linzer and ken schultz for suggestions and advice many thanks to thomas pla mper for sharing the computer code for his procedure to analyze fixed effects with time invariant covariates in stata the usual disclaimers apply

a non cooperative bargaining model with strategically timed offers abstract rubinstein s alternating offers bargaining model is enriched by allowing players to choose when and whether or not to make an offer time is continuous and players make offers whenever they wish it is assumed that upon making an offer players must wait a fixed amount of time before making another it is shown that if players can react arbitrarily quickly to their opponent s offers then all subgame perfect equilibrium outcomes are rubinstein like in particular efficient however if it takes time to react then some delay can be supported this potential delay becomes arbitrarily large as reaction times increase journal of economic literature classification numbers c78 c72

explaining institutional change policy areas outside options and the bretton woods institutions i propose and test a theoretical framework that explains institutional change in international relations like firms in markets international institutions are affected by the underlying characteristics of their policy areas some policy areas are prone to produce institutions facing relatively little competition limiting the outside options of member states and impeding redistributive change in comparison institutions facing severe competition will quickly reflect changes in underlying state interests and power to test the theory empirically i exploit common features of the bretton woods institutions the international monetary fund and world bank to isolate the effect of variation in policy area characteristics the empirical tests show that despite having identical membership and internal rules bargaining outcomes in the bretton woods institutions have diverged sharply and in accordance with the theory

rationalist explanations for war realist and other scholars commonly hold that rationally led states can and sometimes do fight when no peaceful bargains exist that both would prefer to war against this view i show that under very broad conditions there will exist negotiated settlements that genuinely rational states would mutually prefer to a risky and costly fight popular rationalist and realist explanations for war fail either to address or to explain adequately what would prevent leaders from locating a less costly bargain essentially just two mechanisms can resolve this puzzle on strictly rationalist terms the first turns on the fact that states have both private information about capabilities and resolve and the incentive to misrepresent it the second turns on the fact that in specific strategic contexts states may be unable credibly to commit to uphold a mutually preferable bargain historical examples suggest that both mechanisms are empirically plausible

are stationarity and cointegration restrictions really necessary for the intertemporal budget constraint abstract time series related to fiscal and external deficits are commonly subjected to stationarity and cointegration tests to assess if the deficits are sustainable such tests are incapable of rejecting sustainability the intertemporal budget constraint proves to be satisfied if either the debt series or the revenue and with interest spending series are integrated of arbitrarily high order i e stationary after differencing arbitrarily often revenues and spending do not have to be cointegrated rejections of low order difference stationarity and of cointegration are thus consistent with the intertemporal budget constraint error correction type policy reaction functions are suggested as more promising for understanding deficit problems

bargaining uncertainty and property rights in fisheries garrett hardin s tragedy of the commons metaphor is commonly invoked to account for the unfortunate state of world fisheries but the world s oceans are no longer a global commons and have not been so for the past two decades open access regimes have persisted within many exclusive economic zones eezs during this time but coastal states authority to regulate domestic fisheries has existed for more than a generation faced with the prospect of hardin s tragedy coastal states have had more than twenty years to devise institutional constraints that would prevent it this article asserts that the dismal experience with eezs is in large part attributable to distributive bargaining problems that arose within coastal states in the wake of eez extension moreover the article argues that high levels of uncertainty that characterize the early stages of institutional development have exacerbated these problems finally the article demonstrates how the variety of institutional designs and paths of institutional development that are observed in the cases of iceland norway and atlantic canada result from the different configurations of political power and political structure within each case while the empirical discussion is focused upon property rights and fisheries the theoretical discussion of bargaining and uncertainty has widespread application across comparative and international politics

capabilities uncertainty and resolve a limited information model of crisis bargaining this paper presents and solves a crisis bargaining game under limited information the sides alternate offers from three possible offers with war and its costs starting if the target s counteroffer is rejected the equilibrium of the model falls into four different cases these four cases are analyzed to determine how the sides communicate through their offers and how the costs of war initial beliefs misperceptions and distribution of capabilities drive the probabilities of a crisis and war the model demonstrates a joint selection bias misspecification problem in empirical studies of crises arising from the unobservable nature of beliefs several empirical studies of crisis bargaining are discussed in the light of this methodological problem new patterns of evidence are found that support the presence of the selection problem and their conclusions are reexamined

coordination versus prisoners dilemma implications for international cooperation and regimes the study of political institutions in general and international cooperation in particular has been beneficially influenced by the prisoners dilemma pd game model but there is a mistaken tendency to treat pd as representing the singular problem of collective action and cooperation by relaxing the assumptions of 2 2 games and developing an alternate model of the coordination game i show how some cooperation problems have very different properties from those found in pd the analytical results of the two games are compared across several important dimensions number of strategies available number of iterations of the game numbers of players and the distribution of power among them the discussion is illustrated with specific problems of international cooperation and the implications of alternative cooperation problems for the formation and performance of international regimes are explored the basic solutions for pd and coordination have divergent ramifications for the institutionalization stability and adaptability of regimes and for the role of hegemony in the international system however the coordination model does not replace the pd model but complements and supplements it as a way to understand the diversity of political institutions these results are widely applicable to areas of politics beyond international relations

strategic bargaining models and interpretation of strike data attrition screening and signalling models of strategic bargaining are characterized in terms of their predictions about the incidence mean duration and settlement rates of strikes and the terms of wage settlements these predictions are compared with the general features observed in empirical studies of strikes in canada and the united states conclusions are drawn about the types of models capable of generating these features and about the conformity of the models to the evidence methods are described for computing the numerical examples used to illustrate the models

neorealism and neoliberalism the classic dialectic between realist and liberal theories of international politics as expressed by robert o keohane ed in neorealism and its critics and richard rosecrance the rise of the trading state can be transcended neither paradigm singularly explains international behavior realism is the dominant approach but liberal theories of transnationalism and interdependence help to illuminate how national interests are learned and changed keohane and fellow critics argue that neorealism articulated definitively in kenneth waltz s theory of international politics 1979 elegantly systematizes realism but concentrates on international system structure at the expense of system process focused tightly on the concept of bipolarity waltz s theory tends toward stasis the unit state level unproductively becomes an analytical dumping ground as a neoliberal counterpoint rosecrance s argument does not go far enough in the tradition of commercial liberalism he argues that an open trading system offers states maneuverability through economic growth rather than through military conquest he tempers his argument with realist considerations of prudence but fails to clarify realist liberal links in his theory or to explore fully the connections between power and non power incentives influencing states behavior a synthesis of neorealism and neoliberalism is warranted a systemic theory using the former to analyze at the level of structure the latter more often at the level of process

relative gains and the pattern of international cooperation many political situations involve competitions where winning is more important than doing well in international politics this relative gains problem is widely argued to be a major impediment to cooperation under anarchy after discussing why states might seek relative gains i demonstrate that the hypothesis holds very different implications from those usually presumed relative gains do impede cooperation in the two actor case and provide an important justification for treating international anarchy as a prisoner s dilemma problem but if the initial absolute gains situation is not a prisoner s dilemma relative gains seeking is much less consequential its significance is even more attenuated with more than two competitors relative gains cannot prop up the realist critique of international cooperation theory but may affect the pattern of cooperation when a small number of states are the most central international actors

a bargaining model with incomplete information multiplicity of sequential equilibria is a common problem in bargaining models with incomplete information in which the informed player makes an offer most of these equilibria are supported by optimistic conjectures by the uninformed player this paper re examines the bargaining model in rubinstein 1985a b monotonicity restrictions are placed on off the equilibrium path beliefs to exclude equilibria supported by optimistic conjectures sequential equilibria that survive these restrictions are characterized

goliath s curse coercive threats and asymmetric power states typically issue compellent threats against considerably weaker adversaries yet their threats often fail why expanding on a standard model of inter national crisis bargaining i argue that a theory of reputation building can help shed light on this puzzle the model casts reputation as a strategic problem showing that challengers issuing compellent threats have incentives to anticipate the reputation costs that target states incur when appeasing aggressors if challengers can recognize these costs and offset them with side payments or smaller demands then even reputation conscious targets will acquiesce i argue however that military strength contributes to information problems that make challengers more likely to underesti mate their targets reputation costs and insufficiently compensate them in this way military power can undermine the effectiveness of compellent threats the logic is illustrated by the 1939 russo finnish crisis and the argument s implications for the study of coercive diplomacy are explored

global communications and national power life on the pareto frontier regime analysis has focused on issues of market failure the resolution of which depends upon knowledge and institution building global communications regimes however have been concerned either with issues of pure coordination or with coordination problems with distributional consequences outcomes have been decided by the underlying distribution of national power in those areas where power was asymmetrically distributed and there was no agreement on basic principles and norms radio broadcasting and remote sensing no regime was formed in those areas where distributional issues could not be unilaterally resolved allocation of the radio spectrum and telecommunications regimes were created although both principles and rules changed with alterations in national power capabilities

trigger points and budget cuts explaining the effects of fiscal austerity we propose and solve an optimizing model which explains counterintuitive effects of fiscal policy in terms of expectations if government spending follows an upward trending stochastic process which the public believes may fall sharply when it reaches specific trigger points then optimizing consumption behavior and simple budget constraint arithmetic imply a nonlinear relationship between private consumption and government spending this theoretical relation is consistent with the experience of several countries jel e62 e21 textbook aggregate demand models suggest simple relationships between the government budget and economic activity a cut in the government deficit for example depressing consumption and output though such models heavily influence the design of stabilization policies their micro foundations are unclear and their sharp predictions are not always consistent with reality in many countries large cuts in government spending carried out as part of stabilization programs have led to expansions rather than contractions in economic activity the absence of simple relationships be

repeated dichotomous choice formats for elicitation of willingness to pay simultaneous estimation and anchoring effect repeated dichotomous choice contingent valuation data are generated from responses to a succession of binary questions regarding alternative prices for an environmental good in this paper we propose a simultaneous equation model that allows for endogeneity and error correlation across the responses at each stage of the bidding process the model allows us to study the evolution of anchoring effects after the second dichotomous choice question estimation involves the bayesian techniques of gibbs sampling and data augmentation and the application focuses on the preservation value of a natural area the results for a data set involving up to four successive dichotomous choice questions show that restricted multiple bounded models are rejected by the data with the general model in addition willingness to pay tends to stabilize after the second stage in the elicitation process for the general unrestricted model when taking anchoring effects into consideration it is revealed that individuals responses in the latter stages are influenced by the sequence of bid prices offered in earlier questions nevertheless they do not have a significant effect on welfare estimates