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Nash Equilibrium Tariffs in a Dynamic Stochastic Game: An Application to US and EC Strategic Decisions

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  • Karp, Larry

Abstract

Polley making involves dynamics, uncertainty, and strategy, which (although they overlap) can be regarded as separate aspects of the decision maker's problem. Analyzing equilibrium pohc1es (when all considerations are present) and determining how the equilibrium is altered (when one or more aspects ts ignored) are made possible by having an analytical tool that nests dynamics, uncertainty, and strategy and pernuts them to be included in the model in any combination. A tractable dynamic stochastic game (which is such a tool) 1s discussed, and its merits are mdtcated by means of an example of strategic tanff and tax pohc1es involving the USA and European Community.

Suggested Citation

  • Karp, Larry, 1987. "Nash Equilibrium Tariffs in a Dynamic Stochastic Game: An Application to US and EC Strategic Decisions," Occasional Paper Series No. 4 197447, International Association of Agricultural Economists.
  • Handle: RePEc:ags:iaaeo4:197447
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    References listed on IDEAS

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    1. Kydland, Finn, 1975. "Noncooperative and Dominant Player Solutions in Discrete Dynamic Games," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 16(2), pages 321-335, June.
    2. 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.
    3. Edward Tower, 1975. "The Optimum Quota and Retaliation," Review of Economic Studies, Oxford University Press, vol. 42(4), pages 623-630.
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