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Consumer Nationalism and Multilateral Trade Cooperation

Author

Listed:
  • Costas Hadjiyiannis
  • Doruk Iris
  • Chrysostomos Tabakis

Abstract

We investigate the implications of consumer nationalism for multilateral trade cooperation. We develop a two-country, two-firm model, in which the firms produce horizontally differentiated products and act as Bertrand competitors. Assuming that there is asymmetry in consumer nationalism between countries, we show that the country with the (relatively more) nationalist consumers can sustain more liberal trade policies than its trade partner in a repeated-game setting. Moreover, its most cooperative equilibrium tariff is actually decreasing in the level of its consumers' nationalism, provided that countries are not too patient. On the other hand, asymmetric consumer nationalism across countries produces an anti-cooperation effect on the incentives of the country with the non-nationalist consumers.

Suggested Citation

  • Costas Hadjiyiannis & Doruk Iris & Chrysostomos Tabakis, 2018. "Consumer Nationalism and Multilateral Trade Cooperation," University of Cyprus Working Papers in Economics 10-2018, University of Cyprus Department of Economics.
  • Handle: RePEc:ucy:cypeua:10-2018
    as

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    File URL: https://papers.econ.ucy.ac.cy/RePEc/papers/10-18.pdf
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    References listed on IDEAS

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    More about this item

    Keywords

    Consumer nationalism; consumer ethnocentrism; multilateral cooperation;
    All these keywords.

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F52 - International Economics - - International Relations, National Security, and International Political Economy - - - National Security; Economic Nationalism

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