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The Second-Mover Advantage in International Trade Negotiations

Listed author(s):
  • Dluhosch Barbara

    ()

    (Helmut Schmidt University - University FAF Hamburg)

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    The paper explores incentives of national trade representatives (TRs) in international negotiations when trade policy basically follows a non-cooperative track with countries imposing tariffs on each other's exports due to "terms of trade cum international political economy" considerations. The paper shows that negotiations might get stuck even if a limited form of mutual trade liberalization Pareto-dominates the initial Nash-equilibrium in trade policies. The dilemma is rooted in a second-mover advantage, which adds considerable inertia to the Nash equilibrium of protectionism. The second-mover advantage arises whenever the countries' tariffs are strategic complements, with the latter, in turn, conditional on the traded goods being complements in final demand.

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    File URL: https://www.degruyter.com/view/j/gej.2010.10.1/gej.2010.10.1.1528/gej.2010.10.1.1528.xml?format=INT
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    Article provided by De Gruyter in its journal Global Economy Journal.

    Volume (Year): 10 (2010)
    Issue (Month): 1 (February)
    Pages: 1-37

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    Handle: RePEc:bpj:glecon:v:10:y:2010:i:1:n:1
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    12. Koichi Hamada & Shyam Sunder, 2005. "Information Asymmetry and the Problem of Transfers in Trade Negotiations and International Agencies," Yale School of Management Working Papers amz2360, Yale School of Management.
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