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Optimal Tariffs and Retaliation with Perfect Foresight
Post, Gerald V. 세종대학교 국제경제연구소 1987 Journal of Economic Integration Vol.2 No.1
This paper extends the previous work in optimal tariffs and retaliation. The two types of retaliation considered before are based on a Cournot model and a Stackelberg model. The native belief on the part of at least one of the countries in these models is replaced by perfect foresight on the part of both countreis, in that each country knows how the other will respond to a change in tariffs. The problem is expressed as an infinite horizon dynamic programming model in which each country maximizes consumer or producer surplus, subject to the other country's reaction function.