Multi-stage strategic trade policy in a differentiated duopoly

Grigorios Livanis and J. Michael Geringer

Economics Letters, 2021, vol. 206, issue C

Abstract: We consider a three-stage, non-cooperative game between two countries and two firms (duopoly) under a “reciprocal market model” to identify the optimal trade policy in the presence of tariffs and subsidies, but also allowing each country to commit to free trade. Even in the presence of demand uncertainty and horizontal product differentiation, it is established that there always exists a subgame perfect equilibrium in which one of the countries chooses protection while the other country chooses free trade.

Keywords: Strategic trade; Differentiated duopoly; Demand uncertainty (search for similar items in EconPapers)
JEL-codes: F12 (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:206:y:2021:i:c:s0165176521002494

DOI: 10.1016/j.econlet.2021.109972

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