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A Differential Game Model of Tariff War

Author

Listed:
  • 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)

Abstract

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.

Suggested Citation

  • Murray C. Kemp & Ngo Van Long & Koji Shimomura, 2000. "A Differential Game Model of Tariff War," Discussion Paper Series 111, Research Institute for Economics & Business Administration, Kobe University.
  • Handle: RePEc:kob:dpaper:111
    as

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    File URL: http://www.rieb.kobe-u.ac.jp/academic/ra/dp/English/dp111.pdf
    File Function: First version, 2000
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    References listed on IDEAS

    as
    1. Léonard,Daniel & Long,Ngo van, 1992. "Optimal Control Theory and Static Optimization in Economics," Cambridge Books, Cambridge University Press, number 9780521331586, December.
    2. 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, December.
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    Cited by:

    1. Steffen Jørgensen & Georges Zaccour, 2007. "Developments in differential game theory and numerical methods: economic and management applications," Computational Management Science, Springer, vol. 4(2), pages 159-181, April.
    2. Calzolari, Giacomo & Lambertini, Luca, 2007. "Export restraints in a model of trade with capital accumulation," Journal of Economic Dynamics and Control, Elsevier, pages 3822-3842.
    3. Murray C. Kemp & Ngo Van Long, 2007. "Development Aid in the Presence of Corruption: Differential Games among Donors," CIRANO Working Papers 2007s-23, CIRANO.

    More about this item

    Keywords

    Tariff-setting game; Durbale consumption good; Markov-perfect strategies; The rate of time preference;

    JEL classification:

    • D90 - Microeconomics - - Micro-Based Behavioral Economics - - - General
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations

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