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Trade Policy and Economic Integration in a Cournot Duopoly Model

Author

Listed:
  • Yu-Ter Wang

    (Department of Economics, Ming Chuan University, Taoyaun, Taiwan.)

  • Bih-Jane Liu

    (Department of Economics, National Taiwan University, Taiwan.)

  • Pan-Long Tsai

    (Department of Economics, National Tsing Hua University, Taiwan.)

Abstract

This paper investigates the policy and welfare implications of forming an economic region in the context of a Cournot duopoly model. Some theoretical results are obtained. First, the economic region lowers the external tariff (against non-partner countries) less than its pre-integration level when a sufficiently large subsidy on the imports from the partner is carried out. Second, economic integration reduces the non-partner country’s welfare. Third, although the region still gains from integration even under some partial trade liberalisation regimes, complete trade liberalisation within the region leads to higher regional welfare. Finally, trade liberalisation within the region improves the welfare of the world as a whole.

Suggested Citation

  • Yu-Ter Wang & Bih-Jane Liu & Pan-Long Tsai, 2004. "Trade Policy and Economic Integration in a Cournot Duopoly Model," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 43(3), pages 239-251.
    • Handle: RePEc:pid:journl:v:43:y:2004:i:3:p:239-251
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    References listed on IDEAS

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    More about this item

    Keywords

    Trade Policy; Economic Integration;

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F15 - International Economics - - Trade - - - Economic Integration
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models

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