Geopolitics and International Trade Infrastructure
49 Pages Posted: 12 Jul 2021 Last revised: 24 Mar 2022
Date Written: July 8, 2021
We develop a simple (incumbent versus entrant) strategic deterrence model to study the economic and geopolitical interactions underlying international trade-related infrastructure projects such as the Panama Canal. We study the incentives for global geopolitical players to support allied satellite countries where these projects are or could potentially be built. We show that even if no effective competitor emerges, the appearance of a geopolitical challenger capable of credibly supporting the entrant has a pro-competition economic effect which benefits consumers all over the world.
Keywords: market entry, deterrence, international trade infrastructure, geopolitics.
JEL Classification: L1, F5
Suggested Citation: Suggested Citation