Competition strategy and governance policy for the dual international supply chains under trade war

Abstract

ABSTRACT Against the backdrop of the full-blown trade war, this study investigates the price discrimination strategies and tariff policies for the dual international supply chains in trade war via game-theoretical modeling and numerical and sensitivity analyses approaches. Three key findings from the study are: (1) both the free trade and trade war scenarios are bilateral and stable, and the free trade scenario is preferable to the trade war scenario. (2) in free trade scenario, the combination of free competition strategy and ‘actionless governance’ policy forms a ‘win-win’ state, which is the best choice for all trade stakeholders from the perspective of long-term sustainable development. (3) in trade war scenario, the combination of aggressive price discrimination strategy and tit-for-tat tariff counterattack policy forms a ‘prisoner’s dilemma’ state.