http://repub.eur.nl/res/aut/966/ List of Publications en http://repub.eur.nl/static-eur/img/logo.png http://repub.eur.nl http://repub.eur.nl/res/pub/6932/ 2000-11-10T00:00:00Z In an oligopoly, prior to competing in the market, firms have an opportunity to form pair-wise collaborative links with other firms. These pair-wise links involve a commitment of resources and lead to lower costs of production of the collaborating firms. The collection of pair-wise links defines a collaboration network. We study the architecture of strategically stable networks. Our analysis reveals that in a setting where firms are ex-ante identical, strategically stable networks are often asymmetric, with some firms having a large number of links while others have few links or no links at all. We characterize such asymmetric networks; the dominant group architecture, stars, and inter-linked stars are found to be stable. In asymmetric networks, the firms with many links have lower costs of production as compared to firms with few links. Thus collaboration links can have a major influence on the functioning of the market. http://repub.eur.nl/res/pub/1625/ 1999-12-22T00:00:00Z In recent years, there has been a great deal of research on the relative merits of multilateralism and bilateralism and their implications for the nature of the trading regime between countries. In this paper we explore the scope of bilateral free-trade agreements as a foundation for free trade, using recent developments in the theory of strategic network formation. We study a setting with many contries; in each country there are firms, which can sell in the domestic market as well as sell in the foreign markets. The possibility of selling in foreign markets depends on the nature of import tariffs faced by firms. Countries can sign bilateral free-trade agreements which lower import tariffs and thereby facilitate trade. We allow a country to sign any number of bilateral trade agreements. A profile of trade agreements defines the trading regime. We study the nature of trading regimes that are consistent with the incentives of individual countries. Our principal finding is that bilateralism is consistent with global free trade.