The endogenous timing of tariff policy

Tsuyoshi Toshimitsu

No 80, Discussion Paper Series from School of Economics, Kwansei Gakuin University

Abstract: Using the Hamilton–Slutsky extended endogenous timing game of observable delay framework, we analyze the endogenous timing of tariff policy in the presence of a time lag between production and trade decisions. We particularly focus on the strategic relationships between the government of the importing country and an exporting monopoly firm. We show that a natural Stackelberg situation exists in which the importing country government as first mover determines the tariff rate and the exporting monopoly firm as second mover determines the production level. We also find this equilibrium is Pareto superior to both the Nash and alternative Stackelberg equilibria. This implies that commitment to a given tariff policy before the production decision is made is optimal for affected parties.

Keywords: endogenous timing game; Nash equilibrium; Stackelberg equilibrium; tariff policy; monopoly (search for similar items in EconPapers)
JEL-codes: F13 (search for similar items in EconPapers)
Pages: 25 pages
Date: 2012-02, Revised 2012-02
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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