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When Are Voluntary Export Restraints Voluntary? : A Differential Game Approach

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  • Kenji Fujiwara

    (Kwansei Gakuin University)

Abstract

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.

Suggested Citation

  • Kenji Fujiwara, 2010. "When Are Voluntary Export Restraints Voluntary? : A Differential Game Approach," Discussion Paper Series 52, School of Economics, Kwansei Gakuin University, revised Apr 2010.
    • Handle: RePEc:kgu:wpaper:52
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    References listed on IDEAS

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    1. Jonathan Eaton & Gene M. Grossman, 1986. "Optimal Trade and Industrial Policy Under Oligopoly," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 101(2), pages 383-406.
    2. Dockner Engelbert J. & Van Long Ngo, 1993. "International Pollution Control: Cooperative versus Noncooperative Strategies," Journal of Environmental Economics and Management, Elsevier, vol. 25(1), pages 13-29, July.
    3. Chao-Cheng Mai & Hong Hwang, 1988. "Why Voluntary Export Restraints Are Voluntary: An Extension," Canadian Journal of Economics, Canadian Economics Association, vol. 21(4), pages 877-882, November.
    4. Wirl, Franz, 1996. "Dynamic voluntary provision of public goods: Extension to nonlinear strategies," European Journal of Political Economy, Elsevier, vol. 12(3), pages 555-560, November.
    5. Rowat, Colin, 2007. "Non-linear strategies in a linear quadratic differential game," Journal of Economic Dynamics and Control, Elsevier, vol. 31(10), pages 3179-3202, October.
    6. Shimomura, Koji, 1991. "The feedback equilibria of a differential game of capitalism," Journal of Economic Dynamics and Control, Elsevier, vol. 15(2), pages 317-338, April.
    7. Calzolari, Giacomo & Lambertini, Luca, 2007. "Export restraints in a model of trade with capital accumulation," Journal of Economic Dynamics and Control, Elsevier, vol. 31(12), pages 3822-3842, December.
    8. Itaya, Jun-ichi & Shimomura, Koji, 2001. "A dynamic conjectural variations model in the private provision of public goods: a differential game approach," Journal of Public Economics, Elsevier, vol. 81(1), pages 153-172, July.
    9. Richard Harris, 1985. "Why Voluntary Export Restraints Are 'Voluntary.'," Canadian Journal of Economics, Canadian Economics Association, vol. 18(4), pages 799-809, November.
    10. Syropoulos, Constantinos, 1996. "On Pareto-improving voluntary export restraints," International Journal of Industrial Organization, Elsevier, vol. 14(1), pages 71-84.
    11. Rubio, Santiago J. & Casino, Begona, 2002. "A note on cooperative versus non-cooperative strategies in international pollution control," Resource and Energy Economics, Elsevier, vol. 24(3), pages 251-261, June.
    12. Fershtman, Chaim & Kamien, Morton I, 1987. "Dynamic Duopolistic Competition with Sticky Prices," Econometrica, Econometric Society, vol. 55(5), pages 1151-1164, September.
    13. Dockner,Engelbert J. & Jorgensen,Steffen & Long,Ngo Van & Sorger,Gerhard, 2000. "Differential Games in Economics and Management Science," Cambridge Books, Cambridge University Press, number 9780521637329.
    14. Engelbert J. Dockner & Alfred A. Haug, 1991. "The Closed-Loop Motive for Voluntary Export Restraints," Canadian Journal of Economics, Canadian Economics Association, vol. 24(3), pages 679-685, August.
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    Cited by:

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    3. Javier Frutos & Guiomar Martín-Herrán, 2018. "Selection of a Markov Perfect Nash Equilibrium in a Class of Differential Games," Dynamic Games and Applications, Springer, vol. 8(3), pages 620-636, September.

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