TY  - JOUR
AU  - Jensen,Richard A.
AU  - Thursby,Marie
TI  - Tariffs with Private Information and Reputation
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 2959
PY  - 1990
Y2  - November 1990
UR  - http://www.nber.org/papers/w2959
L1  - http://www.nber.org/papers/w2959.pdf
N1  - Author contact info:
Richard Jensen
Dept. of Economics 
University of Notre Dame
434 Flanner Hall
Notre Dame, IN 46556
E-Mail: richard.jensen.24@nd.edu

Marie C. Thursby
College of Management
Georgia Institute of Technology
800 West Peachtree Street, NW
Atlanta, GA 30308-1149
Tel: 404/894-6249
Fax: 404/385-4894
E-Mail: marie.thursby@mgt.gatech.edu
AB  - When governments choose trade policy, rarely do they have complete information, At the time decisions are made, policy makers have only estimates of market responses, as well as the responses of foreign governments. In many realistic situations, even the policy objectives of other governments may not be known. For example, the balance of constitutional powers in the United States is often cited as a source of confusion as to objectives of U.S. trade policy. In this paper we examine the Bayesian Nash equilibria of several noncooperative tariff games with incomplete information, In the models examined, the home country has private information about whether its government is a low or high tariff type. If the foreign government is uncertain about this type in a one-shot game, its Nash equilibrium tariff will be lower (higher) than if it knew the home government were a low (high) tariff type. In two multistage games, misleading behavior by the home government is shown to be an equilibrium strategy for sufficiently high discount factors. Whether the uncertainty is persistent or can be resolved is shown to be important for welfare results in the multistage setting. In the models examined, tariff rules do not necessarily dominate discretionary policy.
ER  -