Nash and social welfare impact in an international trade model. (English) Zbl 1391.91122
Summary: We study a classic international trade model consisting of a strategic game in the tariffs of the governments. The model is a two-stage game where, at the first stage, governments of each country use their welfare functions to choose their tariffs either (i) competitively (Nash equilibrium) or (ii) cooperatively (social optimum). In the second stage, firms choose competitively (Nash) their home and export quantities. We compare the competitive (Nash) tariffs with the cooperative (social) tariffs and we classify the game type according to the coincidence or not of these equilibria as a social equilibrium, a prisoner’s dilemma or a lose-win dilemma.
MSC:
| 91B60 | Trade models |
| 91B54 | Special types of economic markets (including Cournot, Bertrand) |
| 91A20 | Multistage and repeated games |
Keywords:
international trade; international duopoly; tariffs game; prisoner’s dilemma; Nash equilibrium; social optimum; welfareReferences:
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