Landlocked Countries: A Way to Integrate with Coastal Economies

Lahiri, Bidisha; Masjidi, Feroz K.

doi:2012.27.4.505

Journal of Economic Integration 2012 December;27(4) :505-519.
DOI: https://doi.org/10.11130/jei.2012.27.4.505

Landlocked Countries: A Way to Integrate with Coastal Economies

Bidisha Lahiri, Feroz K. Masjidi

Oklahoma State University

Corresponding Author: Bidisha Lahiri ,Tel: 405 744-7530, Email: bidisha.lahiri@okstate.edu

ABSTRACT

We consider some of the important economic constraints faced by landlocked economies in a game theoretic framework that involves its neighbor that has access to the ocean. We identify the strengths that the landlocked economy might have or develop through policy in order to negotiate with its neighbor. The model is an infinitely repeated game between two asymmetric economies, with the threat of reversion to Nash equilibrium if an economy deviates from the cooperative agreement. We find that sustainable cooperative equilibriums that are Pareto superior do exist, drawing attention to the benefits of economic cooperation between neighbors even if they differ on geographical, political, or diplomatic issues. We do several robustness checks that further bring out the constraints and policy implications for the landlocked economies.

JEL Classification

F51: International Conflicts; Negotiations; Sanctions
F53: International Agreements and Observance; International Organizations
F55: International Institutional Arrangements
F59: Other

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