DOMINANT STRATEGIC TRADE POLICY
DOI:
https://doi.org/10.17770/etr2021vol2.6542Keywords:
strategic trade policy, Nash equilibrium, tariffs, quotas, subsidiesAbstract
In implementing trade policy measures, governments usually select from a range of instruments including quotas, subsidies (explicit or implicit) and tariffs. In this paper we consider the potential gain of a government pursuing a two-part trade policy: an import license for entry, along with a per-unit tariff on imports. The model is a three-step game between home and foreign countries in the Cournot duopoly. The paper demonstrates that two-part trade policy is dominant.Downloads
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