Reexamination of the International Export Quota Game Through the Theory of Social Situations

Noritsugu Nakanishi

No 275228, Queen's Institute for Economic Research Discussion Papers from Queen's University - Department of Economics

Abstract: It is a well-known theorem in international trade that a Nash equilibrium between two countries that set optimal quotas non-cooperatively is the complete elimination of international trade. Yet we know that countries do by quotas on one another and that trade is not eliminated. This paper explores the hypothesis that the discrepancy lies in the weakness of Nash equilibrium concept. Specifically, we agree that the replacement of the Nash equilibrium with Greenberg's (1990) concept of a "standard-of-behavior" yields a much more plausible result. We construct a model of the quota retaliation as an "individual contingent threats situation." We show the existence of what Greenberg calls a "stable standard-of-behavior" and examine its welfare properties. In a static, essentially non-cooperative setting, we show that every stable standard-of-behavior supports at least one Pareto-efficient combination of quotas and vice versa. Free trade can be "rationalized" by a stable standard-of-behavior.

Keywords: Financial; Economics (search for similar items in EconPapers)
Pages: 36
Date: 1995-08
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://ageconsearch.umn.edu/record/275228/files/QUEENS-IER-PAPER-928.pdf (application/pdf)

Related works:
Journal Article: Reexamination of the International Export Quota Game through the Theory of Social Situations (1999)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ags:queddp:275228

DOI: 10.22004/ag.econ.275228

Access Statistics for this paper

More papers in Queen's Institute for Economic Research Discussion Papers from Queen's University - Department of Economics Contact information at EDIRC.
Bibliographic data for series maintained by AgEcon Search ().