International Transfers: Strategic Losses and the Blocking of Mutually Advantageous Transfers.

Recent studies indicate the possibility that, in the more-than-two-country model, a coalition may block a competitive equilibrium by means of mutually advantageous transfers among its members. This study demonstrates that even the equilibrium which is to be established after a mutually advantageous transfer may be blocked. In order to form a blocking coalition, a country may take a strategic loss, i.e., give or receive a transfer which reduces its own utility. This provides a possible reason why a country may, not out of benevolence, give or receive a transfer which it knows to reduce its own utility. Copyright 1991 by Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.