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A game theoretical analysis of economic sanction

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  • Shidiqi, khalifany ash
  • Pradiptyo, rimawan

Abstract

Economic sanction has been widely used and increasingly a popular tool in maintaining peace and political stability in the world. The use of economic sanction, as opposed to the use of military power, to punish target countries have been supported by the Charter of United Nations (UN). Tsebelis (1990) modelled economic sanctions using game theory and found that any attempt to increase the severity of the sanctions was counterintuitive, namely the policy reduced the likelihood of sender country(s) in enforcing economic sanction, however, it did not change the probability of the target country(s) in violating international agreement/law. This paper focuses on the refinement of the sanction game proposed by Tsebelis (1990) to analyse international relations. Recent findings from various studies on the effectiveness of economic sanction have been used to reconstruct the game. In contrast to Tsebelis’(1990) findings, any attempt to increase the severity of economic sanction may reduce the probability of the target country(s) in violating international agreement/law. A similar result was obtained in the case for which the sender country(s) applies any policy in preventing violation of international agreement/law by providing aids, assistances, and incentives to the target country.

Suggested Citation

  • Shidiqi, khalifany ash & Pradiptyo, rimawan, 2011. "A game theoretical analysis of economic sanction," MPRA Paper 30481, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:30481
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    File URL: https://mpra.ub.uni-muenchen.de/30481/1/MPRA_paper_30481.pdf
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    References listed on IDEAS

    as
    1. Bruno S. Frey & Manfred J. Holler, 1998. "Tax Compliance Policy Reconsidered," Homo Oeconomicus, Institute of SocioEconomics, vol. 15, pages 27-45.
    2. Pradiptyo Rimawan, 2007. "Does Punishment Matter? A Refinement of the Inspection Game," Review of Law & Economics, De Gruyter, vol. 3(2), pages 197-219, August.
    3. Romp, Graham, 1997. "Game Theory: Introduction and Applications," OUP Catalogue, Oxford University Press, number 9780198775027.
    4. Wittman, Donald, 1985. "Counter-intuitive results in game theory," European Journal of Political Economy, Elsevier, vol. 1(1), pages 77-89.
    5. Bianco, William T. & Ordeshook, Peter C. & Tsebelis, George, 1990. "Crime and Punishment: Are One-Shot, Two-Person Games Enough?," American Political Science Review, Cambridge University Press, vol. 84(2), pages 569-586, June.
    6. Tsebelis, George, 1989. "The Abuse of Probability in Political Analysis: The Robinson Crusoe Fallacy," American Political Science Review, Cambridge University Press, vol. 83(1), pages 77-91, March.
    7. Gary Clyde Hufbauer & Jeffrey J. Schott & Kimberly Ann Elliott, 1990. "Economic Sanctions Reconsidered: 2nd Edition," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 82, January.
    8. Wittman, Donald, 1993. "Nash equilibrium vs. maximin : A comparative game statics analysis," European Journal of Political Economy, Elsevier, vol. 9(4), pages 559-565, November.
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    More about this item

    Keywords

    Economic Sanction; the Sanction/Inspection Games; Mixed Strategy Equilibrium;
    All these keywords.

    JEL classification:

    • F51 - International Economics - - International Relations, National Security, and International Political Economy - - - International Conflicts; Negotiations; Sanctions
    • K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law
    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games

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