Breach, Remedies and Dispute Settlement in Trade Agreements

53 Pages Posted: 3 Nov 2009 Last revised: 29 Sep 2024

See all articles by Giovanni Maggi

Giovanni Maggi

Yale University; National Bureau of Economic Research (NBER); Yale University - Cowles Foundation

Robert W. Staiger

Stanford University; University of Wisconsin - Madison - Department of Economics; National Bureau of Economic Research (NBER)

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Date Written: October 2009

Abstract

We provide a simple but novel model of trade agreements that highlights the role of transaction costs, renegotiation and dispute settlement. The model allows us to characterize the appropriate remedy for breach and whether the agreement should be structured as a system of "property rights" or "liability rules." We then study how the optimal rules depend on the underlying economic and contracting environment. Our model also delivers predictions about the outcome of trade disputes, and in particular about the propensity of countries to settle early versus "fighting it out."

Suggested Citation

Maggi, Giovanni and Staiger, Robert W., Breach, Remedies and Dispute Settlement in Trade Agreements (October 2009). NBER Working Paper No. w15460, Available at SSRN: https://ssrn.com/abstract=1498961

Giovanni Maggi (Contact Author)

Yale University ( email )

New Haven, CT 06511
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National Bureau of Economic Research (NBER)

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Yale University - Cowles Foundation

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Robert W. Staiger

Stanford University ( email )

Stanford, CA 94305
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University of Wisconsin - Madison - Department of Economics ( email )

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Madison, WI 53706
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608-262-2265 (Phone)

National Bureau of Economic Research (NBER)

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