Consumer Nationalism and Multilateral Trade Cooperation

Costas Hadjiyiannis (), Doruk İriş () and Chrysostomos Tabakis

University of Cyprus Working Papers in Economics from University of Cyprus Department of Economics

Abstract: We investigate the implications of consumer nationalism for multilateral trade cooperation. We develop a two-country, two-firm model, in which the firms produce horizontally differentiated products and act as Bertrand competitors. Assuming that there is asymmetry in consumer nationalism between countries, we show that the country with the (relatively more) nationalist consumers can sustain more liberal trade policies than its trade partner in a repeated-game setting. Moreover, its most cooperative equilibrium tariff is actually decreasing in the level of its consumers' nationalism, provided that countries are not too patient. On the other hand, asymmetric consumer nationalism across countries produces an anti-cooperation effect on the incentives of the country with the non-nationalist consumers.

Keywords: Consumer nationalism; consumer ethnocentrism, multilateral cooperation (search for similar items in EconPapers)
JEL-codes: F12 F13 F52 (search for similar items in EconPapers)
Pages: 22 pages
Date: 2018-08
New Economics Papers: this item is included in nep-int
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Persistent link: https://EconPapers.repec.org/RePEc:ucy:cypeua:10-2018

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