The Second-Mover Advantage in International Trade Negotiations
AbstractThe paper explores incentives of national trade representatives (TRs) in international negotiations when trade policy basically follows a non-cooperative track with countries imposing tariffs on each other's exports due to "terms of trade cum international political economy" considerations. The paper shows that negotiations might get stuck even if a limited form of mutual trade liberalization Pareto-dominates the initial Nash-equilibrium in trade policies. The dilemma is rooted in a second-mover advantage, which adds considerable inertia to the Nash equilibrium of protectionism. The second-mover advantage arises whenever the countries' tariffs are strategic complements, with the latter, in turn, conditional on the traded goods being complements in final demand.
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Bibliographic InfoArticle provided by De Gruyter in its journal Global Economy Journal.
Volume (Year): 10 (2010)
Issue (Month): 1 (February)
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Web page: http://www.degruyter.com
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- Barbara Dluhosch & Nikolai Ziegler, 2011. "The paradox of weakness in the politics of trade integration," Constitutional Political Economy, Springer, vol. 22(4), pages 325-354, December.
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