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Abstract
This study developed a conceptual analysis based on an asymmetric deterrence game with
incomplete information to analyze how trade disputes arise between a given pair of WTO
members. We found that the probability of trade dispute is an increasing function of the level of
subsidies curtailments sought by the challenger. We hypothesized the challenger’s demand is
determined by the political and economic profiles of the countries involved. An empirical
investigation of the roles of these political and economic variables yielded mixed results,
highlighting, in some cases, the preeminence of political or economic heterogeneity within dyads
and, in other, that of homogeneity. These findings were attributed to the shifting paradigm in
international trade with the emergence of economic powers such as China, India, Korea, and
Brazil, to name a few, with political and economic profiles different from those of traditional
major players such as the United States, the European Union, and Japan.