تعادل نش در تعرفه های گمرکی
Abstract
۱٫ Introduction
۲٫ The model
۳٫ Existence
۴٫ Strictly increasing best response functions
۵٫ On Nash equilibria of the tariff game
۶٫ Concluding comments
۷٫ Proofs
Appendix. Robust examples of tariff games that are not supermodular
Appendix A. Supplementary data
References
Abstract
We study a general equilibrium model of trade with two goods and many countries where each country sets its distortionary tariff non-cooperatively to maximize the payoff of the representative household. We prove the existence of pure strategy Nash equilibria by showing that there are consistent bounds on tariff rates that are common across countries and that payoff functions in the induced game are quasiconcave. Separately, we show that best responses are strictly increasing functions, and provide robust examples that show that the game need not be supermodular. The fact that a country’s payoff does not respond monotonically to increases in a competitor’s tariff rate, shows that the standard condition in the literature for payoff comparisons across Nash equilibria fails in our model. We then show that the participation of at most two countries in negotiated tariff changes suffices to induce a Pareto improving allocation relative to a Nash equilibrium. Further results provided concern the location of the best response in relation to the free trade point, the monotonicity of payoffs, and the bounds on equilibrium strategies. The final result is that there is no trade if and only if the equilibrium allocation is Pareto optimal.
Introduction
The ability to impose a tariff is arguably the tool most commonly used by a government to influence foreign trade. This is done to benefit the country as it moves the equilibrium allocation in an appropriate direction away from free trade. Since retaliation is only to be expected, the resulting strategic equilibrium becomes the object of analysis; importantly, the allocation induced is, quite generally, inefficient.1 This sets the stage for a role for institutions that regulate and promote international trade to attempt to mitigate the inefficiency by facilitating the negotiation of multilateral agreements.2 The heterogeneity across countries, particularly in terms of their relative size and tastes, is likely to play a key role in the determination of the rules of multilateral engagement used by these institutions to achieve the desired mitigation. An essential element of any analysis that provides the foundation for such rules would be to clarify the manner in which heterogeneity interacts with the number of countries in consideration, and our aim is to contribute to that analysis. We study a model with many countries in which the prices that domestic agents face are the world prices distorted by a tariff, and where the revenue from the tariff is distributed by the government to the agents as a lump-sum transfer. Trade in competitive markets results in the determination of world prices for goods in general equilibrium, and each government acts non-cooperatively to set tariff rates to maximize the utility of the agents. The equilibrium concept used is pure strategy Nash equilibrium. The literature on optimal tariffs in the presence of retaliation has drawn attention to the importance of solving for the Nash equilibrium of a non-cooperative tariff game.