The Optimal Penal Code vs. Infinite Nash Reversion in Trade Liberalization.
This paper derives Abreu's stick-and-carrot strategy optimal penal codes (1986) in a partial equilibrium model that has been widely used to examine trade liberalization. Unless the asymmetry between countries is significant, the optimal penal codes take a simple form. It is also shown that the difference between the most-cooperative pairs of tariffs supported by two schemes, the optimal penal code and infinite Nash reversion, depends crucially on the size of the surplus from exports that a deviating country foregoes when the other country places an embargo, rather than the (punitive) optimum tariff, on imports in the punishment. Copyright 1999 by Blackwell Publishing Ltd.
Year of publication: |
1999
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Authors: | Furusawa, Taiji |
Published in: |
Review of International Economics. - Wiley Blackwell, ISSN 0965-7576. - Vol. 7.1999, 4, p. 673-81
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Publisher: |
Wiley Blackwell |
Saved in:
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