When Are Voluntary Export Restraints Voluntary? : A Differential Game Approach
We revisit voluntariness of voluntary export restraints (VERs) in a differential game model of duopoly with sticky prices. We show that a VER set at the free trade level has no effect on equilibrium under open-loop strategies while the same policy results in a smaller profit for the exporting firm, i.e. it is involuntary under a non-linear feedback strategy. Moreover, we prove an extended proposition of Dockner and Haug (1991) on voluntariness of VERs under a linear feedback strategy.
|Date of creation:||Apr 2010|
|Date of revision:||Apr 2010|
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