The Closed-Loop Motive for Voluntary Export Restraints

Engelbert Dockner and Alfred Haug

Canadian Journal of Economics, 1991, vol. 24, issue 3, 679-85

Abstract: This paper examines the effects of voluntary export restraints in a dynamic game model of duopolistic competition. It is shown that the imposition of a voluntary export restraint at the free-trade level of imports increases the market price and the profits of all firms in the industry if free trade is identified as the closed-loop (subgame-perfect) Cournot equilibrium of the game. Hence, the authors conclude that the predictions of static Cournot competition do not carry over to the dynamic case.

Date: 1991
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