Tariffs with private information and reputation
When governments choose trade policy, rarely do they have complete information, At the time decisions are made, policy makers have only estimates of market responses, as well as the responses of foreign governments. In many realistic situations, even the policy objectives of other governments may not be known. For example, the balance of constitutional powers in the United States is often cited as a source of confusion as to objectives of U.S. trade policy. In this paper we examine the Bayesian Nash equilibria of several noncooperative tariff games with incomplete information, In the models examined, the home country has private information about whether its government is a low or high tariff type. If the foreign government is uncertain about this type in a one-shot game, its Nash equilibrium tariff will be lower (higher) than if it knew the home government were a low (high) tariff type. In two multistage games, misleading behavior by the home government is shown to be an equilibrium strategy for sufficiently high discount factors. Whether the uncertainty is persistent or can be resolved is shown to be important for welfare results in the multistage setting. In the models examined, tariff rules do not necessarily dominate discretionary policy.
(This abstract was borrowed from another version of this item.)
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Alan C. Stockman & Harris Dellas, 1984.
"Asset Markets, Tariffs, and Political Risk,"
NBER Working Papers
1413, National Bureau of Economic Research, Inc.
- Thursby, Marie & Jensen, Richard, 1983. "A conjectural variation approach to strategic tariff equilibria," Journal of International Economics, Elsevier, vol. 14(1-2), pages 145-161, February.
- Robert C. Feenstra & Tracy R. Lewis, 1991.
"Negotiated Trade Restrictions with Private Political Pressure,"
The Quarterly Journal of Economics,
Oxford University Press, vol. 106(4), pages 1287-1307.
- Robert C. Feenstra & Tracy R. Lewis, 1987. "Negotiated Trade Restrictions with Private Political Pressure," NBER Working Papers 2374, National Bureau of Economic Research, Inc.
- Jonathan Eaton & Gene M. Grossman, 1981.
"Tariffs as Insurance: Optimal Commercial Policy When Domestic Markets Are Incomplete,"
NBER Working Papers
0797, National Bureau of Economic Research, Inc.
- Jonathan Eaton & Gene M. Grossman, 1985. "Tariffs as Insurance: Optimal Commercial Policy When Domestic Markets Are Incomplete," Canadian Journal of Economics, Canadian Economics Association, vol. 18(2), pages 258-272, May.
- Kyle Bagwell & Robert W. Staiger, 1989.
"A Theory of Managed Trade,"
801, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- Riezman, Raymond, 1991.
"Dynamic tariffs with asymmetric information,"
Journal of International Economics,
Elsevier, vol. 30(3-4), pages 267-283, May.
- Mayer, Wolfgang, 1984. "Endogenous Tariff Formation," American Economic Review, American Economic Association, vol. 74(5), pages 970-985, December.
- Leslie Young & James E. Anderson, 1980. "The Optimal Policies for Restricting Trade under Uncertainty," Review of Economic Studies, Oxford University Press, vol. 47(5), pages 927-932.
- David Kreps & Robert Wilson, 1998.
Levine's Working Paper Archive
237, David K. Levine.
- Rosenthal, R W, 1979. "Sequences of Games with Varying Opponents," Econometrica, Econometric Society, vol. 47(6), pages 1353-1366, November.
- repec:hoo:wpaper:e-88-39 is not listed on IDEAS
- Staiger, Robert W. & Tabellini, Guido, 1989.
"Rules and discretion in trade policy,"
European Economic Review,
Elsevier, vol. 33(6), pages 1265-1277, July.
- Anderson, James E. & Young, Leslie, 1982. "The optimality of tariff quotas under uncertainty," Journal of International Economics, Elsevier, vol. 13(3-4), pages 337-351, November.
- Robert C. Feenstra, 1986.
"Incentive Compatible Trade Policies,"
NBER Working Papers
1977, National Bureau of Economic Research, Inc.
- Cassing, J H & Hillman, A L & Long, N V, 1986. "Risk Aversion, Terms of Trade Uncertainty and Social-Consensus Trade Policy," Oxford Economic Papers, Oxford University Press, vol. 38(2), pages 234-242, July.
When requesting a correction, please mention this item's handle: RePEc:eee:inecon:v:29:y:1990:i:1-2:p:43-67. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Shamier, Wendy)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.