Endogenous Sequencing in Strategic Trade Policy Games Under Uncertainty
This paper examines a strategic trade policy game with endogenous timing. A trade-off between commitment and flexibility is identified. The equilibrium timing of trade policy decisions is shown to highly depend on the degree of demand uncertainty. When demand uncertainty is low, countervailing duties will never be used because the home government always sets its import tariff before the foreign government sets its export subsidy. When demand uncertainty reaches a threshold level, the home government starts to find it optimal to move second with positive probability. As a result, we provide an economic rationale for the prevailing use of countervailing duties in practice. Copyright Kluwer Academic Publishers 1997
Volume (Year): 8 (1997)
Issue (Month): 4 (October)
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References listed on IDEAS
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- Dixit, Avinash, 1988. "Anti-dumping and countervailing duties under oligopoly," European Economic Review, Elsevier, vol. 32(1), pages 55-68, January.
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- Russell Cooper & Raymond Riezman, 2013. "Uncertainty and the Choice of Trade Policy in Oligopolistic Industries," World Scientific Book Chapters,in: International Trade Agreements and Political Economy, chapter 16, pages 287-298 World Scientific Publishing Co. Pte. Ltd..
- Russell Cooper & Raymond Riezman, 1989. "Uncertainty and the Choice of Trade Policy in Oligopolistic Industries," Review of Economic Studies, Oxford University Press, vol. 56(1), pages 129-140.
- Jeffrey J. Schott, 1994. "Uruguay Round: An Assessment," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 64, January. Full references (including those not matched with items on IDEAS)
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