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Manipulable behavior in international trade

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  • Sun, Ning
  • Yao, Hongxin
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    Abstract

    In this paper, we present a Cournot duopoly model to analyze the manipulated behavior in international trade. The WTO is assumed as an arbitrator for the exchange in an oligopolistic industry and sets tariff rules according to the SDT principles; a firm's cost is private information both for the WTO and the foreign rivalries. Subsequent to our analysis of several cases we find that a firm may misreport to the WTO for more production revenue and the government may collude with a firm for higher welfare. It is shown that the misreporting and collusion incentives are related to the WTO tariff rule, the misreported cost and market size. Furthermore, a strategy proof tariff rule has been designed in which firms can never make his revenue better off by misreporting production cost.

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    Bibliographic Info

    Article provided by Elsevier in its journal Economic Modelling.

    Volume (Year): 28 (2011)
    Issue (Month): 1-2 (January)
    Pages: 60-66

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    Handle: RePEc:eee:ecmode:v:28:y:2011:i:1-2:p:60-66

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    Web page: http://www.elsevier.com/locate/inca/30411

    Related research

    Keywords: Manipulable behavior Misreport Cournot duopoly Strategy proof tariff rule SDT principles;

    References

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    1. Matschke, Xenia, 2003. "Tariff and quota equivalence in the presence of asymmetric information," Journal of International Economics, Elsevier, vol. 61(1), pages 209-223, October.
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    8. Jonathan Eaton & Gene M. Grossman, 1983. "Optimal Trade and Industrial Policy Under Oligopoly," NBER Working Papers 1236, National Bureau of Economic Research, Inc.
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    12. Dixit, Avinash, 1984. "International Trade Policy for Oligopolistic Industries," Economic Journal, Royal Economic Society, vol. 94(376a), pages 1-16, Supplemen.
    13. Michalopoulos, Constantine, 2000. "The role of special differential treatment for developing countries in GATT and the World Trade Organization," Policy Research Working Paper Series 2388, The World Bank.
    14. Qui, Larry D., 1994. "Optimal strategic trade policy under asymmetric information," Journal of International Economics, Elsevier, vol. 36(3-4), pages 333-354, May.
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    16. Herander, Mark G & Kamp, Brad, 1999. "Tariff Policy and Entry with Cost-Based Informational Asymmetries," Economic Inquiry, Western Economic Association International, vol. 37(1), pages 60-73, January.
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    Cited by:
    1. Bou√ęt, Antoine & Cassagnard, Patrice, 2013. "Strategic trade policy under asymmetric information with screening," Economic Modelling, Elsevier, vol. 32(C), pages 286-293.

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