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Sustaining free trade in repeated games without government commitment

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  • Michael B. Devereux

Abstract

The paper examines how free trade can be sustained in a repeated tariff game in a simple two-country general equilibrium model. In the standard model, free trade can be sustained by "punishment strategies" with only a mild degree of forward looking behaviour on the part of governments. However, when there are short term factor market rigidities, and governments cannot precommit to an ex-ante optimal tariff, it may be much more difficult to sustain free trade. This is illustrated in two models.

Suggested Citation

  • Michael B. Devereux, 1990. "Sustaining free trade in repeated games without government commitment," Working Papers 199006, School of Economics, University College Dublin.
    • Handle: RePEc:ucn:wpaper:199006
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    Download full text from publisher

    File URL: http://hdl.handle.net/10197/1475
    File Function: First version, 1990
    Download Restriction: no
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    Cited by:

    1. Kyle Bagwell & Robert W. Staiger, 2000. "GATT-Think," NBER Working Papers 8005, National Bureau of Economic Research, Inc.

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