Chapter 2 Trade Liberalization as a Game of Decision Under Uncertainty

Henry Wan and Yinggang Zhou

A chapter in Globalization and Emerging Issues in Trade Theory and Policy, 2008, pp 15-28 from Emerald Group Publishing Limited

Abstract: Purpose − This study explains a puzzle: most countries realize the mutual benefit of tariff cutting, but tariffs never become zero. Approach − The method is decision-theoretic, and proves the results by example. Findings − The Johnson tariff-ridden equilibrium may be unique, but not the free-trade equilibrium, and tariff cutting may cause a ‘decision problem under uncertainty’ (d.p.u.u.) of Luce, R.D., Raiffa, H. (1989), in which mutual tariff-cutting benefits both parties only up to some point. Originality/value − This approach addresses a pragmatic problem with global analysis and suggests institutional rearrangement to avoid such conundrum.

Keywords: Trade liberalization; tariff-cutting; game; uncertainty; Research paper (search for similar items in EconPapers)
Date: 2008
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Persistent link: https://EconPapers.repec.org/RePEc:eme:fegzzz:s1574-8715(08)05002-1

DOI: 10.1016/S1574-8715(08)05002-1

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