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Stable Tariffs and Retaliations

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  • Reza Oladi

Abstract

A two‐country, two‐commodity model of trade is considered to reformulate the tariff retaliations. It is known that tariff retaliations lead to a Nash‐equilibrium, a non‐free‐trade outcome. However, the negotiation process underlying the Nash equilibrium does not capture the notion of retaliation properly. We use the “contingent threat situation” to reformulate tariff retaliations. In this context, we show that the free trade is a stable outcome. More surprisingly, this interesting result is also valid for the “Johnson case,” where one country is better off under the tariff‐ridden Nash equilibrium compared to free trade.

Suggested Citation

  • Reza Oladi, 2005. "Stable Tariffs and Retaliations," Review of International Economics, Wiley Blackwell, vol. 13(2), pages 205-215, May.
    • Handle: RePEc:bla:reviec:v:13:y:2005:i:2:p:205-215
    DOI: 10.1111/j.1467-9396.2005.00499.x
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    Cited by:

    1. Batabyal, Amitrajeet, 2023. "How spillovers from pollution cleanup in the Ganges affect welfare in Kanpur and Varanasi," MPRA Paper 118366, University Library of Munich, Germany, revised 23 Aug 2023.
    2. Amitrajeet Batabyal & Hamid Beladi, 2012. "A simple auction mechanism for locating noxious facilities," Letters in Spatial and Resource Sciences, Springer, vol. 5(1), pages 1-6, March.
    3. Ryo Kawasaki & Takashi Sato & Shigeo Muto, 2012. "Farsighted Stable Sets of Tariff Games," TERG Discussion Papers 281, Graduate School of Economics and Management, Tohoku University.
    4. Beladi, Hamid & Chakrabarti, Avik & Hollas, Daniel, 2016. "A public firm in a vertically linked price discriminating spatial duopoly," Economic Systems, Elsevier, vol. 40(1), pages 59-63.
    5. Sheng-Chieh Huang & Xiao Luo, 2008. "Stability, sequential rationality, and subgame consistency," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 34(2), pages 309-329, February.
    6. Hamid Beladi & Sugata Marjit & Xinpeng Xu, 2011. "Protection, Involuntary Self‐Employment And Welfare," The Japanese Economic Review, Japanese Economic Association, vol. 62(2), pages 184-195, June.
    7. Batabyal, Amitrajeet A. & Beladi, Hamid, 2021. "A game-theoretic model of water theft during a drought," Agricultural Water Management, Elsevier, vol. 255(C).
    8. Batabyal, Amitrajeet A. & Kourtit, Karima & Nijkamp, Peter, 2020. "A political-economy analysis of the provision of urban anti-crime technologies in a model with three cities," Technological Forecasting and Social Change, Elsevier, vol. 160(C).
    9. Batabyal, Amitrajeet, 2020. "Monopoly vs. Individual Welfare When a Local Public Good is Used to Attract the Creative Class," MPRA Paper 101465, University Library of Munich, Germany, revised 09 Jun 2020.
    10. Amitrajeet A. Batabyal, 2021. "Monopoly versus Individual Welfare When a Local Public Good Is Used to Attract the Creative Class," International Regional Science Review, , vol. 44(5), pages 605-614, September.
    11. Hamid Beladi & Sugata Marjit & Reza Oladi, 2018. "Does protectionism harm unskilled workers?," Economics and Politics, Wiley Blackwell, vol. 30(3), pages 444-450, November.
    12. Beladi, Hamid & Marjit, Sugata & Weiher, Kenneth, 2011. "An analysis of the demand for skill in a growing economy," Economic Modelling, Elsevier, vol. 28(4), pages 1471-1474, July.
    13. Kawasaki, Ryo, 2015. "Roth–Postlewaite stability and von Neumann–Morgenstern stability," Journal of Mathematical Economics, Elsevier, vol. 58(C), pages 1-6.
    14. Kawasaki, Ryo & Sato, Takashi & Muto, Shigeo, 2015. "Farsightedly stable tariffs," Mathematical Social Sciences, Elsevier, vol. 76(C), pages 118-124.

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