Open AccessStrategic Trade: Weighted Payoff Functions And Diverse Trade Patterns
Author(s) -
Gregory G. Green
Publication year - 2011
Publication title -
the international business and economic research journal/the international business and economics research journal
Language(s) - English
Resource type - Journals
eISSN - 2157-9393
pISSN - 1535-0754
DOI - 10.19030/iber.v2i8.3827
Subject(s) - stochastic game , economics , function (biology) , nash equilibrium , mathematical economics , intra industry trade , microeconomics , international trade , trade barrier , evolutionary biology , biology
This paper extends the basic intra-industry trade model, Brander and Spencer (1985), in two directions. A weight is included in the foreign governments payoff function, similar to Collie (1997), which alters the traditional policy choice when this weight is different than one. We also require each firms output choice be nonnegative. These constraints and the weighted payoff function lead to several Nash equilibria that have not been analyzed in the intra-industry trade literature. Our analysis helps explain why industries satisfying the necessary conditions for intra-industry trade patterns may not actually display such trade patterns. [F12, F13, C72]