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WHEN ARE VOLUNTARY EXPORT RESTRAINTS VOLUNTARY? A DIFFERENTIAL GAME APPROACH
Author(s) -
FUJIWARA KENJI
Publication year - 2010
Publication title -
australian economic papers
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.351
H-Index - 15
eISSN - 1467-8454
pISSN - 0004-900X
DOI - 10.1111/j.1467-8454.2010.00390.x
Subject(s) - voluntariness , duopoly , profit (economics) , turnover , economics , differential (mechanical device) , differential game , microeconomics , mathematics , political science , engineering , mathematical optimization , management , cournot competition , law , aerospace engineering
We revisit voluntariness of voluntary export restraints (VERs) in a differential game model of duopoly with sticky prices. We show that a VER set at the free trade level has no effect on equilibrium under open‐loop strategies while the same policy results in a smaller profit for the exporting firm, i.e. it is involuntary under a non‐linear feedback strategy. Moreover, we prove an extended proposition of Dockner and Haug (1991) on voluntariness of VERs under a linear feedback strategy.