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Farsighted Stable Sets of Tariff Games

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  • Ryo Kawasaki
  • Takashi Sato
  • Shigeo Muto

Abstract

This article analyzes the tariff negotiation game between two countries when the countries are sufficiently farsighted. It extends the research of Nakanishi (2000) and Oladi (2005) for the tariff retaliation game in which countries take into account subsequence retaliations that may occur after their own retaliation. We show that when countries are sufficiently farsighted, all farsighted stable sets of the tariff game are singletons, which are Pareto efficient and strictly individually rational tariff profiles. These results hold regardless of whether coalitional deviations are allowed or not.

Suggested Citation

  • Ryo Kawasaki & Takashi Sato & Shigeo Muto, 2012. "Farsighted Stable Sets of Tariff Games," TERG Discussion Papers 281, Graduate School of Economics and Management, Tohoku University.
  • Handle: RePEc:toh:tergaa:281
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    File URL: http://hdl.handle.net/10097/55410
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    1. Noritsugu Nakanishi, 2009. "Noncooperative farsighted stable set in an n-player prisoners’ dilemma," International Journal of Game Theory, Springer;Game Theory Society, vol. 38(2), pages 249-261, June.
    2. Shino, Junnosuke & Kawasaki, Ryo, 2012. "Farsighted stable sets in Hotelling’s location games," Mathematical Social Sciences, Elsevier, vol. 63(1), pages 23-30.
    3. Edward Tower, 1975. "The Optimum Quota and Retaliation," Review of Economic Studies, Oxford University Press, vol. 42(4), pages 623-630.
    4. Akihiro Suzuki & Shigeo Muto, 2005. "Farsighted Stability in an n-Person Prisoner’s Dilemma," International Journal of Game Theory, Springer;Game Theory Society, vol. 33(3), pages 431-445, September.
    5. Nakanishi, Noritsugu, 1999. "Reexamination of the International Export Quota Game through the Theory of Social Situations," Games and Economic Behavior, Elsevier, vol. 27(1), pages 132-152, April.
    6. Reza Oladi, 2005. "Stable Tariffs and Retaliations," Review of International Economics, Wiley Blackwell, vol. 13(2), pages 205-215, May.
    7. Masuda, Takeshi, 2002. "Farsighted stability in average return games," Mathematical Social Sciences, Elsevier, vol. 44(2), pages 169-181, November.
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