Information Asymmetry and the Problem of Transfers in Trade Negotiations and International Agencies

37 Pages Posted: 16 May 2005

See all articles by Shyam Sunder

Shyam Sunder

Yale University - School of Management; Yale University - Cowles Foundation

Koichi Hamada

Yale University - Department of Economics

Date Written: May 2005

Abstract

This paper studies the role of transfers among groups within a country as well as among countries in a two level game of international trade negotiations. We show that in order to realize the intended transfer in the presence of asymmetric information on the states of recipients (and donors), a transfer process uses up additional resources. The difficulty of making transfers renders it less likely that a nation would find it individually rational to participate as a member of an international institution. Costly transfers render the internal and international adjustment difficult, and serve as a barrier to trade liberalization. Costly international transfers harden the resistance against trade liberalization in the (potentially) recipient country and soften it in the (potentially) donor country.

Keywords: International trade, tariff negotiation, asymmetric information, transfer, WTO common agency, two-level game

JEL Classification: O82, F13, H21, H71, H77

Suggested Citation

Sunder, Shyam and Hamada, Koichi, Information Asymmetry and the Problem of Transfers in Trade Negotiations and International Agencies (May 2005). Available at SSRN: https://ssrn.com/abstract=722628

Shyam Sunder

Yale University - School of Management ( email )

165 Whitney Avenue
P.O. Box 208200
New Haven, CT 06520-8200
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203-432-6160 (Phone)

HOME PAGE: http://www.som.yale.edu/faculty/sunder/

Yale University - Cowles Foundation

Box 208281
New Haven, CT 06520-8281
United States

Koichi Hamada (Contact Author)

Yale University - Department of Economics ( email )

28 Hillhouse Ave
New Haven, CT 06520-8268
United States

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