The Strategy of Sovereign Debt Renegotiations
Eric Bennett Rasmusen
The standard economic theory of perfect competition assumes that there are many buyers and many sellers, all possessing the same information, so that no one can act strategically. This standard theory is clearly not appropriate for analyzing debt renegotiation, where buyer and seller are bound to deal with each other and information is asymmetric. Game theory is a set of techniques developed to analyze economic situations that, like games, involve few players and strategic behavior. This theory has been greatly developed in the past fifteen years, and is useful for understanding some of the paradoxes of debt regenotiation.
Rasmusen, Eric Bennett (1992), "The Strategy of Sovereign Debt Renegotiations," in Ronald Solberg (ed.), The Handbook of Country Risk Analysis, London: Routledge Press.