When Are Sanctions Effective? A Bargaining and Enforcement Framework

TLDR

Existing literature identifies conditions for sanction success, but few studies examine when sanctioning states enforce sanctions against their own firms. The study uses a game‑theoretic model to analyze when sanctioning states are willing to enforce sanctions against their firms. The authors employ a game‑theoretic model and test its implications with the Threat and Imposition of Economic Sanctions (TIES) dataset. Senders often have disincentives to enforce sanctions because restrictions hurt their firms’ competitiveness, and sanctions succeed only when the sender’s firm holds a moderate share of the target’s market relative to foreign competitors; otherwise sanctions are unlikely to be imposed.

Abstract

Abstract Although a considerable literature identifies the conditions under which sanctions are more likely to be successful, few studies examine the question of when sanctioning states or senders are willing to enforce their sanctions laws against their firms. Using a game theoretic model, we argue that imposing sanctions creates a strategic dilemma for senders. We demonstrate that senders often have disincentives to enforce their sanctions policies, given that the restriction on economic transactions with targeted states may undermine their firms' competitiveness. The model indicates that sanctions are more likely to succeed when the sender's firm retains a moderate share of the target's market relative to its foreign competitors. However, the model also demonstrates that sanctions are likely to be imposed only when the conditions do not favor their success. The empirical implications of the model are tested using the Threat and Imposition of Economic Sanctions (TIES) data set.