Farsighted Stable Sets of Tariff Games

Ryo Kawasaki, Takashi Sato and Shigeo Muto

No 281, TERG Discussion Papers from Graduate School of Economics and Management, Tohoku University

Abstract: This article analyzes the tariff negotiation game between two countries when the countries are sufficiently farsighted. It extends the research of Nakanishi (2000) and Oladi (2005) for the tariff retaliation game in which countries take into account subsequence retaliations that may occur after their own retaliation. We show that when countries are sufficiently farsighted, all farsighted stable sets of the tariff game are singletons, which are Pareto efficient and strictly individually rational tariff profiles. These results hold regardless of whether coalitional deviations are allowed or not.

Pages: 18 pages
Date: 2012-04
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Persistent link: https://EconPapers.repec.org/RePEc:toh:tergaa:281

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