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Equilibrium Tariff Schedules In Commercial Policy Games Under Uncertainty
Author(s) -
Laussel Didier,
Soubeyran Antoine
Publication year - 1993
Publication title -
review of international economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.513
H-Index - 58
eISSN - 1467-9396
pISSN - 0965-7576
DOI - 10.1111/j.1467-9396.1993.tb00020.x
Subject(s) - autarky , economics , tariff , protectionism , outcome (game theory) , nash equilibrium , partial equilibrium , shock (circulatory) , microeconomics , variable (mathematics) , general equilibrium theory , international economics , welfare , mathematics , market economy , medicine , mathematical analysis
Abstract A partial two country equilibrium model is built in which two different exogenous random shocks may occur. the governments simultaneously choose tariff functions relating their specific tariff to the level of an observable variable (volume of trade or international price). In the case of a “volume of trade shock” the Nash equilibria of this game are more protectionist the larger the possible trade swings and autarky is always an equilibrium outcome. In the case of a “terms of trade shock”, constant tariffs, at their Nash equilibrium in specific tariff levels are the only sensible equilibrium outcome.