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A Two-Country Game of Competition Policies

Author

Listed:
  • Makoto Yano

    (Institute of Economic Research, Kyoto University)

  • Takakazu Honryo

    (Columbia University)

Abstract

Recently a number of studies have recognized that trade policy can be substituted for by competition policy. This study demonstrates, however, that there is a fundamental difference in the working of terms-of-trade effects between competition policy and tariff policy and that if countries optimally set their respective competition policies, it is unlikely to result in a tariff-war-like state in which all countries adopt distortionary policies. Instead, in a Nash equilibrium, one country maintains perfect competition in its domestic service sector while the other country tolerates imperfect competition.

Suggested Citation

  • Makoto Yano & Takakazu Honryo, 2010. "A Two-Country Game of Competition Policies," KIER Working Papers 698, Kyoto University, Institute of Economic Research.
    • Handle: RePEc:kyo:wpaper:698
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    Cited by:

    1. Chen Pu & Liu Dingming, 2015. "Trade Liberalization and Competition Levels," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 15(1), pages 25-47, January.

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