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| Author: | Bac, M. Raff, H. |
| Title: | A theory of trade concessions |
| Journal: | Journal of International Economics
1997 : MAY, VOL. 42:3/4, p. 483-504 |
| Index terms: | ECONOMICS TARIFFS STRATEGY |
| Language: | eng |
| Abstract: | The authors present a model of tariff disputes and concessions consisting of an infinitely repeated game under bilateral incomplete information. Given potential agreements to be reached through unilateral or reciprocal concessions, the authors find that an agreement involving reciprocal concessions is reached immediately if the discount factor is large and/or the volume of trade is small. Otherwise prior beliefs about country type matter. When both countries hold pessimistic priors, immediate reciprocal concessions still occur. |
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