We present a new tariff-game rule and a new numéraire rule in Krugman's celebrated model to form symmetric trading blocs. We hold that to maintain logical consistency in a world of symmetric trading blocs, an individual bloc should act on the actions of other individual external blocs in a...

In a symmetric model of free-trade blocs, the seemingly innocuous normalization rule by setting the world price of a given good as the numéraire will cause asymmetry in the Nash equilibrium. This paper presents a new symmetric tariff game approach and a new price normalization rule that are...

We prove that the normalization rule in Bond and Syropoulos (1996, Journal of International Economics 40, 411-437) that sets the world price of good 1 as the numéraire causes asymmetry in the Nash equilibrium. Such rule contradicts their symmetric assumption when one derives other blocs'...