Abstract
Game of tariffs: The impact of market concentration on international trade
Highlights
Perfect competition in the market produces the highest volume of welfare measured by the sum of consumer surplus and profits of the operating firms
This paper aims to check how the concentration in the exporting industry influences the tariff level, which is the most important trade barrier
According to the Kalai–Smorodinsky solution, the cooperative result of the game lies on the intersection of the Pareto optimal set and the line joining the status quo (SQ) and m(S) points
Summary
Perfect competition in the market produces the highest volume of welfare measured by the sum of consumer surplus and profits of the operating firms. It determines the lowest possible level of market concentration. Consumer and producer surpluses supplemented by revenues from tariffs were exploited in another study (Zhang, Xue, Zu, 2013) The authors, using this welfare function, proved that starting from any free trade network or even empty network, there is a farsightedly improving path leading to global free trade. The model was founded on welfare functions summing the benefits of each economy participating in international exchange: profits of the exporters, consumer surplus, and the budgetary revenues from customs duty.
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