12 Pages Posted: 13 Apr 2011
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: Suggested Citation
Yano, Makoto and Honryo, Takakazu, A Two-Country Game of Competition Policies. Review of International Economics, Vol. 19, No. 2, pp. 207-218, 2011. Available at SSRN: https://ssrn.com/abstract=1808429 or http://dx.doi.org/10.1111/j.1467-9396.2011.00941.x
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