When the Claim Hits: Bilateral Investment Treaties and Bounded Rational Learning

World Politics, Vol. 65, No. 2

Posted: 2 Aug 2011 Last revised: 26 Jul 2012

See all articles by Lauge N. Skovgaard Poulsen

Lauge N. Skovgaard Poulsen

University College London

Emma Aisbett

ANU - School of Regulation and Global Governance

Date Written: April, 2013

Abstract

Using the international investment regime as its point of departure, the paper introduces notions of bounded rationality to the study of economic diplomacy. Through a multi-method approach, it shows that developing countries often ignored the risks of bilateral investment treaties (BITs) until they themselves became subject to an investment treaty claim. Thus the behavior of developing country governments with regard to the international investment regime is consistent with that observed for individuals in experiments and field studies: they tend to ignore high-impact, low-probability risks if they cannot bring specific ‘vivid’ instances to mind.

Keywords: bounded rationality, international political economy, international economic law, bilateral investment treaties

JEL Classification: D03, F00, F02, F13, F20, F21, F23, F51, F53, F55, K33

Suggested Citation

Skovgaard Poulsen, Lauge N. and Aisbett, Emma, When the Claim Hits: Bilateral Investment Treaties and Bounded Rational Learning (April, 2013). World Politics, Vol. 65, No. 2. Available at SSRN: https://ssrn.com/abstract=1899342 or http://dx.doi.org/10.2139/ssrn.1899342

Lauge N. Skovgaard Poulsen

University College London ( email )

Gower Street
London, WC1E 6BT
United Kingdom

Emma Aisbett (Contact Author)

ANU - School of Regulation and Global Governance ( email )

Canberra, Australian Capital Territory 2601
Australia

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