dEjournals Home Page
Competitio
Online ready Current Most Read Archives Search
Register Login

Competitio

Vol. 20 No. 1-2 (2021)
Papers

A Conjectured Cournot Duopoly Model for the EU–US Automobile Trade: A Game Theoretic Analysis of the TTIP’s Most Traded Product

Published:
2021-11-30
DOI Linkhttps://doi.org/10.21845/comp/2021/1-2/5
Author
Eszter Kovács
View
PDF
Keywords
game theory duopoly model trade policy free trade agreements
License

Copyright (c) 2021 Eszter Kovács

Creative Commons License

This work is licensed under a Creative Commons Attribution 4.0 International License.

How To Cite
Selected Style: APA
Kovács, E. (2021). A Conjectured Cournot Duopoly Model for the EU–US Automobile Trade: A Game Theoretic Analysis of the TTIP’s Most Traded Product. Competitio, 20(1-2), 48-70. https://doi.org/10.21845/comp/2021/1-2/5
Received 2021-02-17
Accepted 2021-06-18
Published 2021-11-30
Abstract

Economic actors, in their interactions with each other, certainly make decisions which are able to improve their original situation. In the case of free trade agreements, tariffs have the effect to manipulate countries’ trade and welfare. In this paper, we try to estimate the impacts of the Transatlantic Trade and Investment Partnership (TTIP) on the profit level of participating countries in the context of the Cournot duopoly model. More specifically, we elaborate the most traded product (MTP) and determine the profit levels in the equilibrium regarding two scenarios (pre and post situations of the TTIP). The findings suggest that the Cournot model seems suitable since it illustrates the possible options and provides a guideline for the decision-making process. Based on the model, it can be shown at which point the highest benefit can be achieved for the participating economies (EU, US) i.e. how long it is worth for the parties to apply additional automotive tariffs.

References
  1. Aichele, R. et al. (2014) Going Deep: The Trade and Welfare Effects of TTIP. CESifo Working Papers No. 5150.
  2. Arkolakis, C. et al. (2012) New Trade Models, Same Old Gains?. The American Economic Review, 102(1), 94-130.
  3. https://doi.org/10.1257/aer.102.1.94
  4. Baggs, J. & Brander, J. (2006) Trade Liberalization, Profitability, and Financial Leverage. Journal of International Business Studies, 37(2), 196-211. https://doi.org/10.1057/palgrave.jibs.8400183
  5. Bagwell, K. & Staiger, R. (2009) The economics of trade agreements in the linear cournot delocation model. National Bureau of Economic Research, Working Paper 15492. https://doi.org/10.3386/w15492
  6. Balassa, B. (1961) The Theory of Economic Integration. Homewood: Richard D. Irwin.
  7. https://doi.org/10.1111/j.1467-6435.1961.tb02365.x
  8. Baldwin, R. (2006) Multilateralising Regionalism: Spaghetti Bowls and Building Blocks on the Path to Global Free Trade. World Economy, 29(11), 1451-1518. https://doi.org/10.1111/j.1467-9701.2006.00852.x
  9. Berden, K. et al. (2009) Non-Tariff Measures in EU‒US Trade and Investment – An Economic Analysis. Final Report for EC DG-Trade, ECORYS, Rotterdam.
  10. Blahó, A. (2004) Világgazdaságtan 2. Budapest: Aula Kiadó.
  11. Bond, E. & W. Park, J. H. (2002) Gradualism in Trade Agreements with Asymmetric Countries. Review of Economic Studies, 69, 379-406.
  12. https://doi.org/10.1111/1467-937X.00210
  13. Brander, J. A. & Spencer, B. J. (1984) Trade Welfare: Tariffs and Cartels. Journal of International Economics, 16, 227-242.
  14. https://doi.org/10.1016/S0022-1996(84)80002-1
  15. Canis, B. & Lattanzio, R. K. (2014) U.S.and EU motor vehicle standards: Issues for transatlantic trade negotiations. CRS Report, 7-5700 R43399.
  16. CEPR (2013) Estimating the Economic Impact on the UK of a Transatlantic Trade and Investment Partnership (TTIP) Agreement between the European Union and the United States. Final Project Report, Centre for Economic Policy Research, Reference P2BIS120020.
  17. Collie, D. R. (1991) Export Subsidies and Countervailing Tariffs. Journal of International Economics, 31, 309-324.
  18. https://doi.org/10.1016/0022-1996(91)90041-4
  19. Collie, D. R. (2020) Maximum‐revenue tariffs versus free trade. Scottish Journal of Political Economy, 67, 442-447. https://doi.org/10.1111/sjpe.12245
  20. Dixit, A. (1984) International trade policy for oligopolistic industries. The Economic Journal, 94, 1-16.
  21. https://doi.org/10.2307/2232651
  22. Eaton, J. & Grossmann, G. M. (1986) Optimal Trade and Industrial Policy under Oligopoly. Quarterly Journal of Economics, 101, 383-106.
  23. https://doi.org/10.2307/1891121
  24. European Parliament (2015) The Transatlantic Trade and investment Partnership (TTIP): Challenges and Opportunities for the Internal Market and Consumer Protection in the Area of Motor Vehicles. Study for the IMCO Committee. Policy Department A: Economic and Scientific Policy.
  25. Eurostat (2021) EU27 (from 2020) trade by SITC product group. ext_st_eu27_2020sitc (2021.03.18.).
  26. https://appsso.eurostat.ec.europa.eu/nui/show.do?dataset=ext_st_eu27_2020sitc&lang=en
  27. Felbermayr, G. et al. (2013) Transatlantic Trade and Invetment Partnership (TTIP): Who benefits from a free trade deal? Part 1: Macroeconomic Effects, Bertelsmann Stiftung, Global Economic Dynamics (GED) Team, Gütersloh.
  28. Fratianni, M. & Pattison, J. (1982) The economics of international organizations. Kyklos, 35(3), 244-262.
  29. https://doi.org/10.1111/j.1467-6435.1982.tb00165.x
  30. Francois, J. F. et al. (2013) Market Structure in Multisector General Equilibrium Models of Open Economies, in Handbook of Computable General Equilibrium Modeling, ed. by P. Dixon and D. Jorgenson, Amsterdam: Elsevier.
  31. https://doi.org/10.1016/B978-0-444-59568-3.00024-9
  32. Fontagné, L. et al. (2013) Transatlantic Trade: Whither Partnership, Which Economic Consequences? CEPII Policy Brief No.1.
  33. Hardin, G. (1968) The Tragedy of the Commons. Science, 162(3859), 1243-1248. https://doi.org/10.1126/science.162.3859.1243
  34. Harsányi, J. C. & Selten, R. (1988) A General Theory of Equilibrium in Games. London: MIT Press.
  35. Helpman, E. & Krugman, P. R. (1989) Trade policy and market structure. Cambridge: MIT Press.
  36. Hofmann, C. et al. (2017) Horizontal Depth: A New Database on the Content of Preferential Trade Agreements. Policy Research Working Paper 7981, World Bank. https://doi.org/10.1596/1813-9450-7981
  37. Hollis, A. (2003) Industrial Concentration, Output, and Trade: An Empirical Exploration. Review of Industrial Organization, Springer, The Industrial Organization Society, 22, 103-119. https://doi.org/10.1023/A:1022903018196
  38. Horn, H. et al. (2010) Beyond the WTO? An anatomy of EU and US preferential trade agreements. The World Economy. 33, 1565-1588.
  39. https://doi.org/10.1111/j.1467-9701.2010.01273.x
  40. Jinji, N. & Mizoguchi, Y. (2015) Rules of Origin and Technology Spillovers from Foreign Direct Investment under International Duopoly. Discussion papers e-15-012, Graduate School of Economics, Kyoto University.
  41. Johnson, H. (1953) Optimum tariffs and retaliation. Review of Economic Studies 21, 142–153. https://doi.org/10.2307/2296006
  42. Kapás, J. (2017) Vezetői közgazdaságtan. Debrecen: Debreceni Egyetemi Kiadó.
  43. Kreps, D. M. (2005) Játékelmélet és közgazdasági modellezés. Budapest: Nemzeti Tankönyvkiadó.
  44. Krugman, P. R. & Obstfeld, M. (1994) International economics. Theory and Policy. New York: Harper Collins College Publishers.
  45. Kutasi, G. et. al. (2014) Az USA-EU kereskedelmi tárgyalások várható hatása a magyar növekedésre. Külgazdaság, 58(7-8), 58-85.
  46. Markusen, J. R. (2002) Multinational Firms and the Theory of International Trade. Cambridge: MIT Press.
  47. https://doi.org/10.7551/mitpress/4797.001.0001
  48. Meade, J. (1955) Trade and Welfare. London: Oxford University Press.
  49. Mészáros, J. (2003) Játékelmélet. Budapest: Gondolat Kiadó.
  50. Molnár, S. & Szidarovszki, F. (2010) Játékelmélet: Többcélú optimalizáció, konfliktuskezelés, differenciáljátékok. Budapest: ComputerBooks Kiadó.
  51. Mrázová, M. (2011) Trade agreements when profits matter. Job market paper. MES and CEP, London School of Economics.
  52. Myerson, R. B. (1997) Game Theory: Analysis of Conflict. Cambridge: Harvard University Press.
  53. Neumann, J. & Morgenstein, O. (1944) Theory of Games and Economic Behaviour. Princeton: Princeton University Press.
  54. Olson, M. (1965) The logic of collective action. Cambridge: Harvard University Press.
  55. Ossa, R. (2015) Why Trade Matters After All. Journal of International Economics, 97, 266–277. https://doi.org/10.1016/j.jinteco.2015.07.002
  56. Ostrom, E. (1990) Governing the commons: The evolution of institutions for collective action. New York: Cambridge University Press.
  57. https://doi.org/10.1017/CBO9780511807763
  58. Owen, G. (2013) Game Theory. Bingley: Emerald Publishing Limited.
  59. Palánkai, T. (2011) A globális és regionális integráció gazdaságtana. Budapest: Akadémiai Kiadó.
  60. Samuelson, P. A. (1952) The Transfer Problem and Transport Costs: the Terms of Trade When Impediments are Absent. Economic Journal, 62, 278-304. https://doi.org/10.2307/2227005
  61. Simonovits, A. (2007) Bevezetés a játékelméletbe: Vázlat. Budapest: MTA Közgazdasági Kutatóközpont.
  62. Soegaard, C. (2013) An Oligopolistic Theory of Regional Trade Agreements. Economic Research Papers 270542, University of Warwick.
  63. Szép, J. & Forgó, F. (1974) Bevezetés a játékelméletbe. Budapest: Közgazdasági és Jogi Könyvkiadó.
  64. Viner, J. (1950) The Customs Union Issue. New York: Carnegie Endowment for International Peace.
  65. World Bank (2021) Deep Trade Agreements. (2021.04.02.) https://datatopics.worldbank.org/dta/dashboard.html
  66. Yi, S. S. (1996) Endogenous formation of customs unions under imperfect competition: open regionalism is good. Journal of International Economics, 41(1-2), 153-177. https://doi.org/10.1016/S0022-1996(96)01429-8
  67. Yu-Ter, W. et al. (2004) Trade Policy and Economic Integration in a Cournot Duopoly Model. The Pakistan Development Review, 43, 239-251. https://doi.org/10.30541/v43i3pp.239-251
  68. Zalai, E. (1998) Általános egyensúlyi modellek alkalmazása gazdaságpolitikai elemzésekre. Közgazdasági Szemle, 45, 1065–1081.
  69. Zizzimos, B. (2011) Optimum Tariffs and Retaliation: How Player numbers matter?. Journal of International Economics, 78(2), 276-286.
  70. https://doi.org/10.1016/j.jinteco.2009.04.003