Support monopolist or consumer? (Application of Game Theory with the Presence of the Government)

Document Type : Original Article

Authors

1 Ministry of Economy

2 Azad Islamic University

Abstract

abstract (for journal site)

Today, it has been established that if countries can employ proper policies in line with the benefits of international trade, they can then prevent related crises in the field of trade, such as payment balance crises. This article models the behavior of monopolists and countries based on possible strategies for each player by presenting a static game between the players. Initially, a scenario is considered in which two countries are indifferent to each other. Then, in the second scenario, two countries are considered to be rivals (enemies), and in the third scenario, three countries are assumed, with one being a rival and the other being indifferent. The results show that in all three scenarios, the dominant strategy for the monopolist is to supply products domestically. However, for the government in the first scenario, the dominant strategy is a zero import tariff (consumer support). In the second scenario, where there is also a rival country, there is no dominant strategy for the government, and equilibrium occurs where the government imposes high tariffs (supporting the monopolist). In the third scenario, the dominant strategy for the government is to impose high import tariffs (supporting the monopolist). In summary, if imports occur from non-rival countries, the government supports consumers, and in the case of imports from other countries, the government supports the monopolist. In short, if the imports are from non-competing countries, the government supports the consumers, and in case of imports from other countries, the government supports the monopolist.

Keywords

References

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Public Sector Economics Studies
Volume 3, Issue 1
April 2024
Pages 41-66

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History

  • Receive Date: 28 November 2023
  • Revise Date: 28 December 2023
  • Accept Date: 30 December 2023

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