Journal of Political Economy Vol. 97 No. 2 1989
Nash Equilibrium Tariffs for the United States and Canada: The Roles of Country Size, Scale Economies, and Capital Mobility
Abstract
A theoretical analysis of "optimal" (Nash equilibrium) tariff rates is presented. A numerical general equilibrium model is then used to find Nash equilibrium tariff rates for the United States and Canada. The Nash equilibrium tariffs are small relative to partial equilibrium estimates: 18 percent for the United States and 6 percent for Canada. The United States is essentially indifferent between the Nash equilibrium and free trade, while Canada is better off at the latter by $4 billion. Empirical results support theoretical predictions that the optimal tariff is smaller when the country is smaller, there are scale economies and free entry, and capital is internationally mobile.
- Volume
- 97
- Issue
- 2
- Pages
- 368-386
- Sources
- bibtex:phds-export.bib