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Manipulable behavior in international trade

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  • Sun, Ning
  • Yao, Hongxin

Abstract

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.

Suggested Citation

  • Sun, Ning & Yao, Hongxin, 2011. "Manipulable behavior in international trade," Economic Modelling, Elsevier, vol. 28(1), pages 60-66.
  • Handle: RePEc:eee:ecmode:v:28:y:2011:i:1:p:60-66
    DOI: 10.1016/j.econmod.2010.09.024
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    References listed on IDEAS

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    Cited by:

    1. Bou√ęt, Antoine & Cassagnard, Patrice, 2013. "Strategic trade policy under asymmetric information with screening," Economic Modelling, Elsevier, vol. 32(C), pages 286-293.

    More about this item

    Keywords

    Manipulable behavior; Misreport; Cournot duopoly; Strategy proof tariff rule; SDT principles;

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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