This paper presents a work-horse model to analyze the mechanism of triadic sanctions, where the receiver of the sanction is not the actual target. With a motivating example of the US sanctions against Iran and a simple game theoretic framework, we show that the threat of such sanction is not credible in situations where the game ends after single stage, or when the entities are not concerned with future transactions amongst each other. In a repeated game setting, on the other hand, the threats become credible, but the level of enforcement would differ across firms/countries depending on the economic interdependency and how the parties perceive the probability that the games would continue to the next period.

Executive Summary

I. Introduction

II. Overview of Triadic Sanctions

III. A model of triadic sanctions
1. A Stage Game
2. An infinitely repeated sanction game

IV. US-Iran Sanction
1. Evolution of the US-Iran Sanction
2. Insights from the game theoretic Analysis

V. Conclusion

Reference