Abstract
Home In a simple model of trade and competition policies we show that the abolition of trade restrictions may lead to governments independently choosing more competitive competition policies. Subsequent co-ordination of competition policy involves encouraging less competitive behaviour than when such policies are not coordinated and may involve disharmonisation, in a sense made clear in the paper. Adding a third country, simulation results indicate that nonmember concerns about customs union formation may be well-founded, particularly when the union goes beyond mere trade policy co-ordination (which may be needed to make it attractive to members in the first place). Copyright 1999 by Royal Economic Society.
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