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Manipulable behavior in international trade

  • Sun, Ning
  • Yao, Hongxin
Registered author(s):

    In this paper, we present a Cournot duopoly model to analyze the manipulated behavior in international trade. The WTO is assumed as an arbitrator for the exchange in an oligopolistic industry and sets tariff rules according to the SDT principles; a firm's cost is private information both for the WTO and the foreign rivalries. Subsequent to our analysis of several cases we find that a firm may misreport to the WTO for more production revenue and the government may collude with a firm for higher welfare. It is shown that the misreporting and collusion incentives are related to the WTO tariff rule, the misreported cost and market size. Furthermore, a strategy proof tariff rule has been designed in which firms can never make his revenue better off by misreporting production cost.

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    File URL: http://www.sciencedirect.com/science/article/pii/S0264-9993(10)00201-4
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    Article provided by Elsevier in its journal Economic Modelling.

    Volume (Year): 28 (2011)
    Issue (Month): 1-2 (January)
    Pages: 60-66

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    Handle: RePEc:eee:ecmode:v:28:y:2011:i:1-2:p:60-66
    Contact details of provider: Web page: http://www.elsevier.com/locate/inca/30411

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    8. Wright, Donald J, 1998. "Strategic Trade Policy and Signalling with Unobservable Costs," Review of International Economics, Wiley Blackwell, vol. 6(1), pages 105-19, February.
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    13. Jonathan Eaton & Gene M. Grossman, 1983. "Optimal Trade and Industrial Policy Under Oligopoly," NBER Working Papers 1236, National Bureau of Economic Research, Inc.
    14. Zigic, Kresimir, 1998. "Strategic Trade Policy: How Important is the International Constraint? The Case of Optimal Tariff When Technological Innovations Spill Over to the Foreign Competitor," CEPR Discussion Papers 1957, C.E.P.R. Discussion Papers.
    15. Collie, David R & Hviid, Morten, 1999. "Tariffs as Signals of Uncompetitiveness," Review of International Economics, Wiley Blackwell, vol. 7(4), pages 571-79, November.
    16. Herander, Mark G & Kamp, Brad, 1999. "Tariff Policy and Entry with Cost-Based Informational Asymmetries," Economic Inquiry, Western Economic Association International, vol. 37(1), pages 60-73, January.
    17. Michalopoulos, Constantine, 2000. "The role of special differential treatment for developing countries in GATT and the World Trade Organization," Policy Research Working Paper Series 2388, The World Bank.
    18. Barbara J. Spencer & James A. Brander, 1982. "Tariff Protection and Imperfect Competition," Working Papers 517, Queen's University, Department of Economics.
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