When Are Sanctions Effective? A Bargaining and Enforcement Framework

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.