When are Sanctions Effective? A Bargaining and Enforcement Framework

Abstract

A considerable literature identifies the conditions under which sanctions are more likely to be successful. However, few studies examine the question of when senders are willing to enforce sanctions laws against their firms. Using a game theoretic model, we argue that the imposition of sanctions creates an enforcement problem for sender states. We demonstrate that senders have disincentives to enforce their sanctions policies, given that the restriction of business transactions with target states may undermine their firms' competitiveness relative to foreign firms. Specifically, the model indicates that sanctions are more likely to succeed when the sender firms' strength in the target's market is moderately strong, that is, it is not too weak or too strong. On the flipside, it also shows that senders are less likely to impose sanctions when their firms' strength is moderate. In essence, due to both economic and political incentives, senders are less likely to impose sanctions when they are more likely to be successful. The model's empirical implications are tested using the Threat and Imposition of Sanctions (TIES) dataset.