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When Are Voluntary Export Restraints Voluntary? A Differential Game Approach

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  • KENJI FUJIWARA

Abstract

We revisit voluntariness of voluntary export restraints (VERs) in a differential game model of duopoly with sticky prices. We show that a VER set at the free trade level has no effect on equilibrium under open‐loop strategies while the same policy results in a smaller profit for the exporting firm, i.e. it is involuntary under a non‐linear feedback strategy. Moreover, we prove an extended proposition of Dockner and Haug (1991) on voluntariness of VERs under a linear feedback strategy.

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  • Kenji Fujiwara, 2010. "When Are Voluntary Export Restraints Voluntary? A Differential Game Approach," Australian Economic Papers, Wiley Blackwell, vol. 49(2), pages 101-110, June.
    • Handle: RePEc:bla:ausecp:v:49:y:2010:i:2:p:101-110
    DOI: 10.1111/j.1467-8454.2010.00390.x
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    1. Jonathan Eaton & Gene M. Grossman, 1986. "Optimal Trade and Industrial Policy Under Oligopoly," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 101(2), pages 383-406.
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    Cited by:

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    2. Luca Lambertini & Arsen Palestini, 2018. "Voluntary Export Restraints in a Trade Model with Sticky Price: Linear and Nonlinear Feedback Solutions," Dynamic Games and Applications, Springer, vol. 8(3), pages 507-518, September.
    3. Javier Frutos & Guiomar Martín-Herrán, 2018. "Selection of a Markov Perfect Nash Equilibrium in a Class of Differential Games," Dynamic Games and Applications, Springer, vol. 8(3), pages 620-636, September.

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