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A Differential Game Model of Tariff War

  • Murray C. Kemp

    (University of New South Wales, Australia)

  • Ngo Van Long

    (McGill University, Canada)

  • Koji Shimomura

    (Research Institute for Economics & Business Administration (RIEB), Kobe University, Japan)

We present a simple two(-country) by two(-good) differental game model of international trade in which the governments of the two countries play a tariff-setting game. We explicitly derive a unilateral optimum tarifff rate and then a Markov-perfect equilibrium pair of tariff strategies (bilateral optimum tariff strategies) and compare the welfare level of each country among autarchic, free-trade, unilateral and bilateral optimum-tariff equilibria.

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Paper provided by Research Institute for Economics & Business Administration, Kobe University in its series Discussion Paper Series with number 111.

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Length: 26 pages
Date of creation: Jun 2000
Date of revision:
Handle: RePEc:kob:dpaper:111
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  1. 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.
  2. Léonard,Daniel & Long,Ngo van, 1992. "Optimal Control Theory and Static Optimization in Economics," Cambridge Books, Cambridge University Press, number 9780521337465.
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