Strategic Export Promotion and Import Protection in a Multi-stage Game.

This paper presents a three-stage trade policy game between one importing country and one exporting country in which the formulation of trade policy is distinguished from its administration. The salient feature of this game is that both countries have the opportunity to choose a free trade policy. The author shows that there always exists a subgame perfect equilibrium in which the exporting country chooses the free trade policy and the importing country chooses an import tariff or quota.