Stable Multilateral Trade Agreements

Abstract

We analyse multilateral tariff negotiations as a game in coalition form. In a model with three identical countries that produce and trade an homogeneous commodity, and where countries' aggregated welfare can weight differently their different components, we analyse how changes in the countries' objective affects the stability of coalitions. In other words, we characterize what tariff-agreements, if any, are stable (i.e. lie in the core).