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When Are Voluntary Export Restraints Voluntary? A Differential Game Approach

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  • KENJI FUJIWARA

Abstract

We revisit voluntariness of voluntary export restraints (VERs) in a differential game model of duopoly with sticky prices. We show that a VER set at the free trade level has no effect on equilibrium under open-loop strategies while the same policy results in a smaller profit for the exporting firm, i.e. it is involuntary under a non-linear feedback strategy. Moreover, we prove an extended proposition of Dockner and Haug (1991) on voluntariness of VERs under a linear feedback strategy. Copyright 2010 The Author. Journal compilation 2010 Blackwell Publishing Ltd/University of Adelaide and Flinders University.

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  • Kenji Fujiwara, 2010. "When Are Voluntary Export Restraints Voluntary? A Differential Game Approach," Australian Economic Papers, Wiley Blackwell, vol. 49(2), pages 101-110, June.
  • Handle: RePEc:bla:ausecp:v:49:y:2010:i:2:p:101-110
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    1. Fershtman, Chaim & Kamien, Morton I, 1987. "Dynamic Duopolistic Competition with Sticky Prices," Econometrica, Econometric Society, vol. 55(5), pages 1151-1164, September.
    2. Calzolari, Giacomo & Lambertini, Luca, 2007. "Export restraints in a model of trade with capital accumulation," Journal of Economic Dynamics and Control, Elsevier, vol. 31(12), pages 3822-3842, December.
    3. Itaya, Jun-ichi & Shimomura, Koji, 2001. "A dynamic conjectural variations model in the private provision of public goods: a differential game approach," Journal of Public Economics, Elsevier, vol. 81(1), pages 153-172, July.
    4. Rowat, Colin, 2007. "Non-linear strategies in a linear quadratic differential game," Journal of Economic Dynamics and Control, Elsevier, vol. 31(10), pages 3179-3202, October.
    5. Jonathan Eaton & Gene M. Grossman, 1986. "Optimal Trade and Industrial Policy Under Oligopoly," The Quarterly Journal of Economics, Oxford University Press, vol. 101(2), pages 383-406.
    6. Richard Harris, 1985. "Why Voluntary Export Restraints Are 'Voluntary.'," Canadian Journal of Economics, Canadian Economics Association, vol. 18(4), pages 799-809, November.
    7. Syropoulos, Constantinos, 1996. "On Pareto-improving voluntary export restraints," International Journal of Industrial Organization, Elsevier, vol. 14(1), pages 71-84.
    8. 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.
    9. Chao-Cheng Mai & Hong Hwang, 1988. "Why Voluntary Export Restraints Are Voluntary: An Extension," Canadian Journal of Economics, Canadian Economics Association, vol. 21(4), pages 877-882, November.
    10. Dockner Engelbert J. & Van Long Ngo, 1993. "International Pollution Control: Cooperative versus Noncooperative Strategies," Journal of Environmental Economics and Management, Elsevier, vol. 25(1), pages 13-29, July.
    11. Engelbert J. Dockner & Alfred A. Haug, 1991. "The Closed-Loop Motive for Voluntary Export Restraints," Canadian Journal of Economics, Canadian Economics Association, vol. 24(3), pages 679-685, August.
    12. Wirl, Franz, 1996. "Dynamic voluntary provision of public goods: Extension to nonlinear strategies," European Journal of Political Economy, Elsevier, vol. 12(3), pages 555-560, November.
    13. Shimomura, Koji, 1991. "The feedback equilibria of a differential game of capitalism," Journal of Economic Dynamics and Control, Elsevier, vol. 15(2), pages 317-338, April.
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    Cited by:

    1. L. Lambertini & A. Palestini, 2017. "Voluntary Export Restraints in a Trade Model with Sticky Price: Linear and Nonlinear Feedback Solutions," Working Papers wp1109, Dipartimento Scienze Economiche, Universita' di Bologna.

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