Note that this model does not predict universal convergence
on liberalization. It predicts convergence toward
either restrictive or liberal policies among competitors.
We assume that a decision maker has good
information about the identity of competitors, their policy
choices, and the material consequences of matching
or failing to match their policies. The model leads to
the following prediction:
Governments’ liberalization policies will be influenced
by the policies of their most important
foreign economic competitors.