A Note on the Endogenous Timing of Tariff Policy in the Presence of a Time Lag between Production and Trade Decisions
Using the Hamilton–Slutsky extended endogenous timing game of observable delay framework, we analyze the endogenous timing of tariff policy in the presence of a time lag between production and trade decisions. In particular, focusing on the strategic relationships between an importing country’s government and an exporting monopoly firm, we show that a natural Stackelberg situation exists in which the importing country’s government as first mover determines the tariff rate and the exporting monopoly firm as second mover determines the production level. We also find that the natural Stackelberg equilibrium is Pareto superior to both the Nash and alternative Stackelberg equilibria. This implies that commitment to an ex ante optimal tariff policy before the production decision is made is optimal for the affected parties. Copyright Springer Science+Business Media New York 2013
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Volume (Year): 24 (2013)
Issue (Month): 2 (April)
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- Albaek, Svend, 1990. "Stackelberg Leadership as a Natural Solution under Cost Uncertainty," Journal of Industrial Economics, Wiley Blackwell, vol. 38(3), pages 335-347, March.
- Tsuyoshi Toshimitsu, 2012. "The endogenous timing of tariff policy," Discussion Paper Series 80, School of Economics, Kwansei Gakuin University, revised Feb 2012.
- Constantinos Syropoulos, 1994. "Endogenous Timing in Games of Commercial Policy," Canadian Journal of Economics, Canadian Economics Association, vol. 27(4), pages 847-864, November. Full references (including those not matched with items on IDEAS)
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