It is often argued that, even if optimal "ex post", settlement dilutes deterrence "ex ante". We analyse the interest for the tax authority of committing, "ex ante", to a settlement strategy. We show that to commit to the use of settlements is "ex ante" optimal when the tax authority receives...

Although global free trade is efficient, each country's benefit from free trade depends on the path that leads to the global free trade agreement. Using a dynamic model of trading bloc formation, we show that when global free trade is reached gradually the countries that are initially excluded...