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A Two-Country Game of Competition Policies

Makoto Yano and Takakazu Honryo ()

No 698, KIER Working Papers from Kyoto University, Institute of Economic Research

Abstract: Recently a number of studies have recognized that trade policy can be substituted for by competition policy. This study demonstrates, however, that there is a fundamental difference in the working of terms-of-trade effects between competition policy and tariff policy and that if countries optimally set their respective competition policies, it is unlikely to result in a tariff-war-like state in which all countries adopt distortionary policies. Instead, in a Nash equilibrium, one country maintains perfect competition in its domestic service sector while the other country tolerates imperfect competition.

Keywords: competition policy; global harmonization; international trade; policy game. (search for similar items in EconPapers)
Pages: 14pages
Date: 2010-03
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Journal Article: A Two‐Country Game of Competition Policies (2011)
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