TY  - JOUR
AU  - Bagwell,Kyle
AU  - Mavroidis,Petros C.
AU  - Staiger,Robert W.
TI  - The Case for Auctioning Countermeasures in the WTO
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 9920
PY  - 2003
Y2  - August 2003
UR  - http://www.nber.org/papers/w9920
L1  - http://www.nber.org/papers/w9920.pdf
N1  - Author contact info:
Kyle Bagwell
Department of Economics
Stanford University
Landau Economics Building
579 Serra Mall
Stanford, CA 94305-6072
Tel: (650) 723-3251
E-Mail: kbagwell@stanford.edu

Robert W. Staiger
Department of Economics
The University of Wisconsin
1180 Observatory Drive
Madison, WI  53705
Tel: 608/262-2265
Fax: 608/263-3876
E-Mail: rstaiger@wisc.edu
AB  - A prominent problem with the WTO dispute settlement procedures is the practical difficulty faced by small and developing countries in finding the capacity to effectively retaliate against trading partners that are in violation of their WTO commitments. In light of this problem, Mexico has proposed that retaliation rights be made  tradeable.' We offer a first formal analysis of the possibility that retaliation rights within the WTO system be allocated through auctions. We show that the auctions exhibit externalities among bidders, and we characterize equilibrium bidder behavior under alternative auction formats. A key feature of auction format is whether the country in violation of its WTO commitments is prevented from bidding to retire the right of retaliation: if so, then the possibility of  auction failure' arises, in which no bids are made despite positive valuation by the bidders; if not, then auction failure is precluded, and indeed the right of retaliation is always retired. We also evaluate these different auction formats from normative (revenue, efficiency) standpoints.
ER  -