Endogenous Timing Decision on Trade Policies Between Importing and Exporting Countries with Many Firms

This chapter examines strategic trade policy games where the number of firms in the importing and exporting countries differs and each firm plays as a Cournot oligopolist. Under the assumption of linear demand and constant marginal cost, we show that, if the number of firms in the exporting country exceeds that of the importing country by more than three, the government of the exporting country chooses to behave as a leader and imposes an export tax on home firms. The government of the importing country becomes a follower and imposes an import tariff on foreign firms. The result is opposite to that of the previous study, where each country has only one firm.