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A Differential Game Model of Tariff War

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Author Info

  • Murray C. Kemp

    (University of New South Wales, Australia)

  • Ngo Van Long

    (McGill University, Canada)

  • Koji Shimomura

    (Research Institute for Economics & Business Administration (RIEB), Kobe University, Japan)

Abstract

We present a simple two(-country) by two(-good) differental game model of international trade in which the governments of the two countries play a tariff-setting game. We explicitly derive a unilateral optimum tarifff rate and then a Markov-perfect equilibrium pair of tariff strategies (bilateral optimum tariff strategies) and compare the welfare level of each country among autarchic, free-trade, unilateral and bilateral optimum-tariff equilibria.

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File URL: http://www.rieb.kobe-u.ac.jp/academic/ra/dp/English/dp111.pdf
File Function: First version, 2000
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Bibliographic Info

Paper provided by Research Institute for Economics & Business Administration, Kobe University in its series Discussion Paper Series with number 111.

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Length: 26 pages
Date of creation: Jun 2000
Date of revision:
Handle: RePEc:kob:dpaper:111

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Keywords: Tariff-setting game; Durbale consumption good; Markov-perfect strategies; The rate of time preference;

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References

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  1. Léonard,Daniel & Long,Ngo van, 1992. "Optimal Control Theory and Static Optimization in Economics," Cambridge Books, Cambridge University Press, number 9780521337465.
  2. Dockner,Engelbert J. & Jorgensen,Steffen & Long,Ngo Van & Sorger,Gerhard, 2000. "Differential Games in Economics and Management Science," Cambridge Books, Cambridge University Press, number 9780521637329.
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Citations

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Cited by:
  1. Steffen Jørgensen & Georges Zaccour, 2007. "Developments in differential game theory and numerical methods: economic and management applications," Computational Management Science, Springer, vol. 4(2), pages 159-181, April.
  2. G. Calzolari & L. Lambertini, 2001. "Export Restraints in a Model of Trade with Capital Accumulation," Working Papers 420, Dipartimento Scienze Economiche, Universita' di Bologna.
  3. Murray C. Kemp & Ngo Van Long, 2007. "Development Aid in the Presence of Corruption: Differential Games among Donors," CIRANO Working Papers 2007s-23, CIRANO.

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