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A Little Help from My Friend: International Subsidy Games with Hyperbolic Demands∗
| Content Provider | Semantic Scholar |
|---|---|
| Author | Matsumoto, Akio Szidarovszky, Ferenc |
| Copyright Year | 2009 |
| Abstract | In this paper, we assume a hyperbolic price function and construct a three-country model with two active governments and two firms. The purpose of this study is to consider dynamic behavior of the sequential subsidy game in which the governments determine their optimal trade policies and, accordingly, the firms choose their optimal outputs. We first show the existence of an optimal trade policy under realistic conditions. Our main results are summarized as follows: (1) when the production costs are identical, then a trade policy and the corresponding optimal output are stable if the demand is elastic while multistability (i.e., coexistence of multiple attracors) and complex dynamics occur if the demand is inelastic; (2) when the production costs are different, then a stable trade policy induces chaotic output fluctuations regardless of demand elasticity; (3) policy dynamics can be chaotic if demand is elastic while multistability still occurs if the demand is inelastic. |
| File Format | PDF HTM / HTML |
| Alternate Webpage(s) | http://www2.tamacc.chuo-u.ac.jp/keizaiken/discussno119.pdf |
| Language | English |
| Access Restriction | Open |
| Content Type | Text |
| Resource Type | Article |
