A Theory of Managed Trade
This paper proposes a theory that predicts low levels of protection during periods of "normal" trade volume coupled with episodes of "special" protection when trade volumes surge. This dynamic pattern of protection emerges from a model in which countries choose levels of protection in a repeated game facing volatile trade swings. High trade volume leads to a greater incentive to defect unilaterally from cooperative tariff levels. Therefore, as the volume of trade expands, the level of protection must rise in a cooperative equilibrium to mitigate the rising trade volume and hold the incentive to defect in check. Copyright 1990 by American Economic Association.
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Volume (Year): 80 (1990)
Issue (Month): 4 (September)
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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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"Renegotiation in Repeated Games,"
Department of Economics, Working Paper Series
qt9wv3h5jb, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
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- Robert C. Feenstra & Tracy R. Lewis, 1987. "Negotiated Trade Restrictions with Private Political Pressure," NBER Working Papers 2374, National Bureau of Economic Research, Inc.
- Mayer, Wolfgang, 1981. "Theoretical Considerations on Negotiated Tariff Adjustments," Oxford Economic Papers, Oxford University Press, vol. 33(1), pages 135-53, March.
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"Dynamic tariffs with asymmetric information,"
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Elsevier, vol. 30(3-4), pages 267-283, May.
- Harry G. Johnson, 1953. "Optimum Tariffs and Retaliation," Review of Economic Studies, Oxford University Press, vol. 21(2), pages 142-153.
- Kennan, John & Riezman, Raymond, 1988.
"Do Big Countries Win Tariff Wars?,"
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Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 29(1), pages 81-85, February.
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