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Trade Policy and Economic Integration in a Cournot Duopoly Model

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Author Info
Yu-Ter Wang (Department of Economics, Ming Chuan University, Taoyaun, Taiwan.)
Bih-Jane Liu (Department of Economics, National Taiwan University, Taiwan.)
Pan-Long Tsai (Department of Economics, National Tsing Hua University, Taiwan.)

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Abstract

This paper investigates the policy and welfare implications of forming an economic region in the context of a Cournot duopoly model. Some theoretical results are obtained. First, the economic region lowers the external tariff (against non-partner countries) less than its pre-integration level when a sufficiently large subsidy on the imports from the partner is carried out. Second, economic integration reduces the non-partner country’s welfare. Third, although the region still gains from integration even under some partial trade liberalisation regimes, complete trade liberalisation within the region leads to higher regional welfare. Finally, trade liberalisation within the region improves the welfare of the world as a whole.

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Publisher Info
Article provided by Pakistan Institute of Development Economics in its journal The Pakistan Development Review.

Volume (Year): 43 (2004)
Issue (Month): 3 ()
Pages: 239-251
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Handle: RePEc:pid:journl:v:43:y:2004:i:3:p:239-251

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Related research
Keywords: Trade Policy Economic Integration

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Find related papers by JEL classification:
F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
F15 - International Economics - - Trade - - - Economic Integration
C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data

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  1. David Collie, 1994. "Endogenous timing in trade policy games: Should governments use countervailing duties?," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 130(1), pages 191-209, March. [Downloadable!] (restricted)
  2. Brander, James A. & Spencer, Barbara J., 1985. "Export subsidies and international market share rivalry," Journal of International Economics, Elsevier, vol. 18(1-2), pages 83-100, February. [Downloadable!] (restricted)
    Other versions:
  3. Constantinos Syropoulos, 1996. "Implications of Preferential Trade Arrangements for Policy and Market Access," Canadian Journal of Economics, Canadian Economics Association, vol. 29(s1), pages 401-05, April. [Downloadable!] (restricted)
  4. Bond, Eric W. & Syropoulos, Constantinos, 1996. "The size of trading blocs Market power and world welfare effects," Journal of International Economics, Elsevier, vol. 40(3-4), pages 411-437, May. [Downloadable!] (restricted)
  5. Bond, Eric W. & Syropoulos, Constantinos & Winters, L. Alan, 2001. "Deepening of regional integration and multilateral trade agreements," Journal of International Economics, Elsevier, vol. 53(2), pages 335-361, April. [Downloadable!] (restricted)
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  6. Richardson, Martin, 1993. "Endogenous protection and trade diversion," Journal of International Economics, Elsevier, vol. 34(3-4), pages 309-324, May. [Downloadable!] (restricted)
  7. Panagariya, Arvind & Findlay, Ronald & DEC, 1994. "A political - economy analysis of free trade areas and customs unions," Policy Research Working Paper Series 1261, The World Bank. [Downloadable!]
  8. Collie, David, 1991. "Export subsidies and countervailing tariffs," Journal of International Economics, Elsevier, vol. 31(3-4), pages 309-324, November. [Downloadable!] (restricted)
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  9. Kemp, Murray C. & Wan, Henry Jr., 1976. "An elementary proposition concerning the formation of customs unions," Journal of International Economics, Elsevier, vol. 6(1), pages 95-97, February. [Downloadable!] (restricted)
  10. Dixit, Avinash, 1988. "Anti-dumping and countervailing duties under oligopoly," European Economic Review, Elsevier, vol. 32(1), pages 55-68, January. [Downloadable!] (restricted)
  11. Bhattacharjea, Aditya, 1995. "Strategic tariffs and endogenous market structures: Trade and industrial policies under imperfect competition," Journal of Development Economics, Elsevier, vol. 47(2), pages 287-312, August. [Downloadable!] (restricted)
  12. Brander, James A. & Spencer, Barbara J., 1984. "Trade warfare: Tariffs and cartels," Journal of International Economics, Elsevier, vol. 16(3-4), pages 227-242, May. [Downloadable!] (restricted)
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  13. Levy, Philip I, 1997. "A Political-Economic Analysis of Free-Trade Agreements," American Economic Review, American Economic Association, vol. 87(4), pages 506-19, September. [Downloadable!] (restricted)
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