A Theory of Managed Trade
This paper proposes a theory that predicts low levels of protection during periods of "normal" trade volume coupled with episodes of "special" protection when trade volumes surge. This dynamic pattern of protection emerges from a model in which countries choose levels of protection in a repeated game setting facing volatile trade swings. High trade volume leads to a greater incentive to unilaterally defect from cooperative tariff levels. Therefore as the volume of trade expands, the level of protection must rise in a cooperative equilibrium to mitigate the rising trade volume and hold the incentive to defect in check.
|Date of creation:||Nov 1988|
|Publication status:||published as American Economic Review, September 1990.|
|Contact details of provider:|| Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.|
Web page: http://www.nber.org
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- John Kennan & Raymond Riezman, 2013.
"Do Big Countries Win Tariff Wars?,"
World Scientific Book Chapters,in: International Trade Agreements and Political Economy, chapter 4, pages 45-51
World Scientific Publishing Co. Pte. Ltd..
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- Riezman, Raymond, 1991. "Dynamic tariffs with asymmetric information," Journal of International Economics, Elsevier, vol. 30(3-4), pages 267-283, May.
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