Rationalizing the International Coffee Agreement virtually

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Abstract

From 1963 to 1989, the International Coffee Agreement controlled world trade in coffee. Like an export cartel, the organization included coffee exporters and importers as members. This paper seeks to understand the behavior of the ICA by treating it as an optimizing entity, which from social choice theory we know to be inherently troublesome. A social choice rule is specified for the ICA that is virtually implementable in Nash equilibrium. The empirical results provide a rationalizing argument for the ICA, in the sense that if it sought to maximize the specified criterion function, we would expect it to behave precisely as it did behave.

Original languageEnglish (US)
Pages (from-to)339-359
Number of pages21
JournalReview of Industrial Organization
Volume10
Issue number3
DOIs
StatePublished - Jun 1 1995

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Keywords

  • International Coffee Agreement
  • social choice
  • virtual implementation

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