The Influence of Agricultural Policy on Economic Integration Among Central American Countries: A Game Theoretic Analysis.
Date of Award
Doctor of Philosophy (PhD)
P. Lynn Kennedy
The influence of eight commodity groups on international economic integration in five Central American countries are analyzed. The commodity groups are rice, beans, corn, sorghum, bananas, coffee, sugar, and beef. The countries are Costa Rica, El Salvador, Guatemala, Honduras, and Nicaragua. A game theory framework is used to find a Nash equilibrium solution to a set of trade negotiation scenarios. The payoffs of the Political Preference Function (PPF) are used for the trade liberalization scenarios under analysis. These PPF payoffs are estimated using the MISS model. The nominal protection coefficient (NPC) is used as the main criterion for trade liberalization. Status quo (SQ) or no reduction in protection, 25%, 50%, 75%, and 100% reductions in protection or free trade (FT), are the scenarios under analysis. Four games are modeled. In game one all PPF weights equal one, which means that all commodities groups have the same importance in the government's view. In game two, all PPF weights are different from one, i.e., the government assigns different degrees of importance to some sectors relative to other sectors and to itself. Game three and four include the PPF weights of game one and two but with a reduction of five percent in the exchange rate. The results show that any individual country will agree to free trade when the rest of countries, as a bloc, reduces protection by 50%. This indicates that Central American countries will be likely to agree on a partial trade liberalization rather than to a more involved form of economic integration. Commodity groups do not affect trade liberalization adversely. The study suggests that the use of game theory is an appropriate approach to analyze economic integration in Central America.
Icabalceta mairena, Jorge Luis, "The Influence of Agricultural Policy on Economic Integration Among Central American Countries: A Game Theoretic Analysis." (2001). LSU Historical Dissertations and Theses. 292.