TY  - JOUR
AU  - Maggi,Giovanni
AU  - Staiger,Robert W.
TI  - Breach, Remedies and Dispute Settlement in Trade Agreements
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 15460
PY  - 2009
Y2  - October 2009
UR  - http://www.nber.org/papers/w15460
L1  - http://www.nber.org/papers/w15460.pdf
N1  - Author contact info:
Giovanni Maggi
Department of Economics
Yale University
37 Hillhouse Avenue Rm 27
New Haven, CT 06511
Tel: 203/432-3569
Fax: 203/432-6323
E-Mail: giovanni.maggi@yale.edu

Robert W. Staiger
Department of Economics
Stanford University
Landau Economics Building
579 Serra Mall
Stanford, CA  94305-6072
Tel: 650/723-0533
Fax: 650/725-5702
E-Mail: rstaiger@stanford.edu
AB  - 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."
ER  -