Nash Equilibrium Tariffs for the United States and Canada: The Roles of Country Size, Scale Economies, and Capital Mobility

Markusen, James R.; Wigle, Randall

doi:10.1086/261607

Cited by 75 publications

(37 citation statements)

References 14 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…For very high import price elasticities this drops to about 8 percent. Markusen and Wigle (1989) find Nash-equilibrium tariff of 18 percent for the United States and 6 percent for Canada. None of these studies yields estimates lower than 5 percent.…”

mentioning

confidence: 93%

Whom to send to Doha? The shortsighted ones!

Larch¹,

Lechthaler²

2013

Review of Economic Dynamics

View full text Add to dashboard Cite

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Why are empirically observed tariffs so much lower than theoretically calculated Nash-equilibrium tariffs? We argue that this gap can be narrowed by using a dynamic model instead of a static model. This approach has two advantages. (i) It allows us to take account of the transitional process after a change in tariffs. (ii) It allows us to take account of the shortsightedness of policy makers. We show that Nash-equilibrium tariffs based on a dynamic trade model are lower than Nash-equilibrium tariffs based on a static model. We also show that shortsighted politicians tend to set lower tariffs than politicians with a long planning horizon. Abstract Why are empirically observed tariffs so much lower than theoretically calculated Nash-equilibrium tariffs? We argue that this gap can be narrowed by using a dynamic model instead of a static model. This approach has two advantages. (i) It allows us to take account of the transitional process after a change in tariffs. (ii) It allows us to take account of the shortsightedness of policy makers. We show that Nash-equilibrium tariffs based on a dynamic trade model are lower than Nash-equilibrium tariffs based on a static model. We also show that shortsighted politicians tend to set lower tariffs than politicians with a long planning horizon. Terms of use: Documents in

show abstract

mentioning

confidence: 93%

Whom to send to Doha? The shortsighted ones!

Larch¹,

Lechthaler²

2013

Review of Economic Dynamics

View full text Add to dashboard Cite

show abstract

“…The authors argue from a simple theoretical model that the possibility of the large country gaining from tariff competition is by no means remote. However a CGE study for the United States and Canada (Markusen and Wigle, 1989) -while supporting the qualitative predictions derived from theoretical models -found that tariff competition is quantitatively weaker than predicted by the model and the large country (the U.S., with a GDP more than ten times as high as the Canadian) does not gain from non-cooperation, despite its relative size. This indicates that simple analytical models may not provide reliable guidelines for a welfare comparison between two different tax equilibria.…”

Section: Introductionmentioning

confidence: 54%

When Do Small Countries Win Tax Wars?

Eggert

Haufler

1998

Public Finance Review

View full text Add to dashboard Cite

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in AbstractThe paper analyzes the conditions under which the smaller of two otherwise identical countries prefers the non-cooperative Nash equilibrium to a situation of fully harmonized tax rates. A standard two-country model of capital tax competition is extended by allowing for transaction costs, additional countries, and additional tax instruments. The effects of introducing either mobility costs or a wage tax instrument are theoretically ambiguous because they lower both the costs and the benefits of non-cooperation from the perspective of the small country. Numerical simulations indicate, however, that for a wide range of parameter values all model extensions considered reduce the possibility that the small country gains from tax competition.

show abstract

“…This is called the Bertrand model in the literature. Larger models are found in [128]. An extension of this framework is given by von Stackelberg [184]; here it is assumed that one firm is the leader and hence knows that all the other firms will act in a Bertrand fashion.…”

Section: Game-theoretic Modelsmentioning

confidence: 99%

Engineering and Economic Applications of Complementarity Problems

Ferris¹,

1997

View full text Add to dashboard Cite

Abstract. This paper gives an extensive documentation of applications of finite-dimensional nonlinear complementarity problems in engineering and equilibrium modeling. For most applications, we describe the problem briefly, state the defining equations of the model, and give functional expressions for the complementarity formulations. The goal of this documentation is threefold: (i) to summarize the essential applications of the nonlinear complementarity problem known to date, (ii) to provide a basis for the continued research on the nonlinear complementarity problem, and (iii) to supply a broad collection of realistic complementarity problems for use in algorithmic experimentation and other studies.

show abstract

Nash Equilibrium Tariffs for the United States and Canada: The Roles of Country Size, Scale Economies, and Capital Mobility

Cited by 75 publications

References 14 publications

Whom to send to Doha? The shortsighted ones!

Whom to send to Doha? The shortsighted ones!

When Do Small Countries Win Tax Wars?

Engineering and Economic Applications of Complementarity Problems

Contact Info

Product

Resources

About