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A Two-Country Game of Competition Policies

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Author Info

  • Makoto Yano

    (Institute of Economic Research, Kyoto University)

  • Takakazu Honryo

    (Columbia University)

Abstract

Recently a number of studies have recognized that trade policy can be substituted for by competition policy. This study demonstrates, however, that there is a fundamental difference in the working of terms-of-trade effects between competition policy and tariff policy and that if countries optimally set their respective competition policies, it is unlikely to result in a tariff-war-like state in which all countries adopt distortionary policies. Instead, in a Nash equilibrium, one country maintains perfect competition in its domestic service sector while the other country tolerates imperfect competition.

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Bibliographic Info

Paper provided by Kyoto University, Institute of Economic Research in its series KIER Working Papers with number 698.

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Length: 14pages
Date of creation: Mar 2010
Date of revision:
Handle: RePEc:kyo:wpaper:698

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Keywords: competition policy; global harmonization; international trade; policy game.;

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