A Differential Game Model of Tariff War

Murray Kemp, Ngo Long and Koji Shimomura

No 111, Discussion Paper Series from Research Institute for Economics & Business Administration, Kobe University

Abstract: We present a simple two(-country) by two(-good) differental game model of international trade in which the governments of the two countries play a tariff-setting game. We explicitly derive a unilateral optimum tarifff rate and then a Markov-perfect equilibrium pair of tariff strategies (bilateral optimum tariff strategies) and compare the welfare level of each country among autarchic, free-trade, unilateral and bilateral optimum-tariff equilibria.

Keywords: Tariff-setting game; Durbale consumption good; Markov-perfect strategies; The rate of time preference (search for similar items in EconPapers)
JEL-codes: D90 F13 (search for similar items in EconPapers)
Pages: 26 pages
Date: 2000-06
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Journal Article: A differential game model of tariff war (2001)
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