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Environmental Regulations, International Trade and Strategic Behavior

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  • Alpay, Savas

Abstract

In this paper, the issue of strategic behavior in the presence of environmental regulations and international trade is investigated. In a two-country, one-good, two-producer model as in Ulph (1996), we analyze the Nash equilibrium of the game where governments may behave strategically in choosing their environmental policies, and producers may behave strategically in choosing their R&D investments. In the simultaneous-move game, there is a unique equilibrium and both governments and producers act strategically. In the sequential-move game, two equilibrium sets of actions are present; however, one of them welfare-dominates the other: firstmoving government acts strategically, the follower government will not act strategically, and none of the producers will behave strategically. Some of our results are in contrast with the implications of earlier papers in this literature.

Suggested Citation

  • Alpay, Savas, 2002. "Environmental Regulations, International Trade and Strategic Behavior," Conference papers 331012, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    • Handle: RePEc:ags:pugtwp:331012
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    References listed on IDEAS

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    1. Shoven,John B. & Whalley,John, 1992. "Applying General Equilibrium," Cambridge Books, Cambridge University Press, number 9780521266550.
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