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Endogenous Timing in a Strategic Trade Policy Game: A Two-Country Oligopoly Model with Multiple Firms

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  • Yordying Supasri
  • Makoto Tawada

Abstract

This paper examines strategic trade policy games where the number of firms in the importing and exporting countries differs and all firms play as Cournot oligopolies. Under the assumption of linear demand and constant marginal cost, we show that, if the number of firms in the exporting country exceeds that in the importing country by more than three, the government of the exporting country chooses to move as a leader, imposing an export tax on firms. The government of the importing country then becomes a follower and imposes an import tariff. This lies contrary to the previous study, which assumed that there is only one firm in each country. Copyright © 2007 The Authors; Journal compilation © 2007 Blackwell Publishing Ltd.

Suggested Citation

  • Yordying Supasri & Makoto Tawada, 2007. "Endogenous Timing in a Strategic Trade Policy Game: A Two-Country Oligopoly Model with Multiple Firms," Review of Development Economics, Wiley Blackwell, vol. 11(2), pages 275-290, May.
  • Handle: RePEc:bla:rdevec:v:11:y:2007:i:2:p:275-290
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    Cited by:

    1. Kenji Fujiwara & Norimichi Matsueda, 2009. "Effects of Transboundary Pollution on the Mode of International Trade of a Polluting Good ," Review of International Economics, Wiley Blackwell, vol. 17(5), pages 1009-1018, November.
    2. Jo, Seung-gyu & den Butter, Frank A. G., 2009. "Pros and Cons of Backing Winners in Innovation Policy," MPRA Paper 17658, University Library of Munich, Germany.

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