(2007), ISSUE 1,
Frontiers in Economic History and the Economic Approach to Law
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The BIT Generation's emergence as a collective action problem: prisoner's dilemma or network effects?
Santiago Montt, Facultad de Derecho de la Universidad de Chile
"The BIT Generation's emergence as a collective action problem: prisoner's dilemma or network effects?",
The Latin American and Caribbean Journal of Legal Studies:
This paper presents a new theory that explains why developing countries have been entering into Bilateral Investment Treaties (BITs) in the last 50 years. It disputes Andrew Guzman’s account which depicts the BIT generation as a result of a prisoner’s dilemma among developing countries. As explained here, the BIT “game” differs from a prisoner’s dilemma in two key ways. First, the BIT game has a sequential/evolutionary nature, stemming from the fact that developing countries have been joining (and rejecting) the network at various times since 1959. Second, unlike the prisoner’s dilemma, the BIT system demonstrates the positive externalities or network effects of having one system of treaties defined in closely similar terms. Taking into account those two differences, a new theory may be presented: the BIT generation as a virtual network.
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