Premium
MULTILATERAL TRADE BARGAINING AND DOMINANT STRATEGIES
Author(s) -
Bagwell Kyle,
Staiger Robert W.
Publication year - 2018
Publication title -
international economic review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 2.658
H-Index - 86
eISSN - 1468-2354
pISSN - 0020-6598
DOI - 10.1111/iere.12320
Subject(s) - tariff , economics , reciprocity (cultural anthropology) , outcome (game theory) , government (linguistics) , bargaining power , construct (python library) , international economics , bargaining problem , commercial policy , microeconomics , international trade , computer science , psychology , social psychology , linguistics , philosophy , programming language
Motivated by General Agreement on Tariffs and Trade bargaining behavior and renegotiation rules, we construct a three‐country, two‐good general‐equilibrium model of trade and examine multilateral tariff bargaining under the constraints of nondiscrimination and multilateral reciprocity. For a general representation of government preferences, we identify the bargaining outcomes that can be achieved using dominant strategy proposals for all countries. In our analysis, dominant strategy outcomes emerge when tariff proposals are followed by multilateral rebalancing. The resulting bargaining outcome is efficient relative to government preferences if and only if the initial tariff vector positions the initial world price at its “politically optimal” level.