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Gains from Trade in a Differential Game Model of Asymmetric Oligopoly

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  • Kenji Fujiwara

Abstract

This paper revisits a classical topic of trade gains in a differential game model of oligopoly in which Home and Foreign firms differ in the number and cost. After deriving the feedback Nash equilibrium, we provide examples to consider how the difference in the number of firms or costs affects gainfulness of trade. We prove that feedback strategies can result in implications for trade gains which are sharply different from the open‐loop case.

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  • Kenji Fujiwara, 2009. "Gains from Trade in a Differential Game Model of Asymmetric Oligopoly," Review of International Economics, Wiley Blackwell, vol. 17(5), pages 1066-1073, November.
    • Handle: RePEc:bla:reviec:v:17:y:2009:i:5:p:1066-1073
    DOI: 10.1111/j.1467-9396.2008.00787.x
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    1. Tsutsui, Shunichi & Mino, Kazuo, 1990. "Nonlinear strategies in dynamic duopolistic competition with sticky prices," Journal of Economic Theory, Elsevier, vol. 52(1), pages 136-161, October.
    2. Fershtman, Chaim & Kamien, Morton I, 1987. "Dynamic Duopolistic Competition with Sticky Prices," Econometrica, Econometric Society, vol. 55(5), pages 1151-1164, September.
    3. Hassan Benchekroun, 2003. "The closed‐loop effect and the profitability of horizontal mergers," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 36(3), pages 546-565, August.
    4. Dockner,Engelbert J. & Jorgensen,Steffen & Long,Ngo Van & Sorger,Gerhard, 2000. "Differential Games in Economics and Management Science," Cambridge Books, Cambridge University Press, number 9780521637329, September.
    5. Dockner, Engelbert J. & Haug, Alfred A., 1990. "Tariffs and quotas under dynamic duopolistic competition," Journal of International Economics, Elsevier, vol. 29(1-2), pages 147-159, August.
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