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Endogenous Timing in a Strategic Trade Policy Game: A Two-Country Oligopoly Model with Multiple Firms

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Author Info
Yordying Supasri
Makoto Tawada
Abstract

This paper examines strategic trade policy games where the number of firms in the importing and exporting countries differs and all firms play as Cournot oligopolies. Under the assumption of linear demand and constant marginal cost, we show that, if the number of firms in the exporting country exceeds that in the importing country by more than three, the government of the exporting country chooses to move as a leader, imposing an export tax on firms. The government of the importing country then becomes a follower and imposes an import tariff. This lies contrary to the previous study, which assumed that there is only one firm in each country. Copyright © 2007 The Authors; Journal compilation © 2007 Blackwell Publishing Ltd.

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File URL: http://www.blackwell-synergy.com/doi/abs/10.1111/j.1467-9361.2007.00415.x
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Article provided by Blackwell Publishing in its journal Review of Development Economics.

Volume (Year): 11 (2007)
Issue (Month): 2 (05)
Pages: 275-290
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Handle: RePEc:bla:rdevec:v:11:y:2007:i:2:p:275-290

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