Title
A Differential Game Model of Tariff War
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.
Murray C. KEMP
University of New South Wales
Sydney
Australia
Ngo Van LONG
McGill University
Montreal
Canada
Koji SHIMOMURA
Research Institute for Economics and Business Administration
Kobe University
Rokkodai-cho, Nada-ku, Kobe
657-8501 Japan
Phone: (81) 78 803 7036
Fax: (81) 78 803 7059