China-Japan-Korea (CJK)'s FTA Strategy towards ASEAN Countries: A Game Theoretical Approach
AbstractThis paper analyzes the FTA strategies of China, Japan and Korea (CJK) toward ASEAN countries using a three-player game. It explores the implications of China, Japan, and/or Korea participating in an FTA with ASEAN and the corresponding rewards in a payoff matrix. The Nash equilibrium occurs when China, Korea and Japan all choose to participate in an FTA with ASEAN. Dominant strategies and response functions for each country are analyzed using Error Correction Mechanism (ECM) and Vector Auto Regression (VAR) models. The paper also finds that Japanâ€™s action to create FTA will be the most effective for regional settings. Although the game analysis is backward looking, it is a useful benchmark for understanding future FTA policies in East Asia.
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Bibliographic InfoPaper provided by Faculty of Economics, University of Indonesia in its series Working Papers in Economics and Business with number 201210.
Length: 12 pages
Date of creation: Oct 2012
Date of revision: Oct 2012
FTA; Game Theory; Error Correction Mechanism; Vector Auto Regressive;
Find related papers by JEL classification:
- F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
- C70 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - General
- C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models &bull Diffusion Processes
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-12-22 (All new papers)
- NEP-GTH-2012-12-22 (Game Theory)
- NEP-SEA-2012-12-22 (South East Asia)
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