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International and world trade law
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This analysis assumes that a maximum of two countries are trading with each other. They both have made negotiations to not to impose a tariff but are thinking to go back on their word and impose a protectionist measure. The analysis also assumes that organisations such as World trade organisation don’t exist and that trading will cease after both countries retaliate. In order for a country to impose a tariff against another country, it must have a first mover advantage. This refers to the advantage that the player who moves first has. (I.e. the country must gain if it imposes a protectionist first rather than if the country is retaliating) The first mover advantage can be best explained by the Stackelberg model. The model is a game between …show more content…
Therefore first we need to analyse firm 2’s moves. The output of firm 1 (q1) is already set. So firm 2 must choose q2. The output of both the firms can be shown on the graph below : For example if firm 1 chooses to produce qx1, firm 2’s best response would be to produce qx2. Similarly if firm 1 produces qy1, then firm 2 should produce qy2. The equation of the line is: p=a-b(q_1+ q_2) where p= profit which is also the payoff in the game. (Ben Polak, 2008) However in this game, firm 1 knows that firm 2 will use this equation to determine its response. In other words firm 1 can anticipate what firm 2 will do. Therefore the problem facing Firm 1 is that what quantity should it set, knowing that firm 2 will use the equation to determine its response. It should choose the output that maximises its profits. So far I know that: p=a-b(q_1+q_2) Profit,i = Pqi – Cqi where P stands for revenue and C stands for costs Backward induction states that this problem should be first solved in terms of firm 2, taking q1 as given. Firm 2 wants to maximise q2. [a-bq_1-bq_2 ] q_2-cq_2 Where: [a-bq_1-bq_2 ] is the price [a-bq_1-bq_2 ] q_2 is the revenue cq_2 is the …show more content…
[a-bq_1-bq_2 ] q_1-cq_1 q_2=(a-c)/2b-q_1/2 [a-bq_1-b((a-c)/2b-q_1/2)-c]
The light of the global recession, assess the likely economics effects of an increase in protectionism on the world economy. (15 marks)
Skyrms’ writing goes beyond traditional game theory, and exposes some weaknesses in its application. He rejects the theory’s traditional interpretation of rational actors and actions by discovering some glaring inconsistencies. Skyrms conducted a number of experiments using one-shot prisoners’ dilemmas. The ultimatum the author introduces in the first chapter serves as a simple example of a one-shot prisoners’ dilemma. In the initial form of the example, Skyrms proposes there is a cake that must be divided between two individuals. Each individual is looking to maximize his or her utility, and therefore, wants as much of the cake as possible. However, there is a third party, or what Skryms labels a “referee.” The two individuals must determine the percentage or portion of the cake they want and summit these requests to the referee. The percentages must not exceed 100%, or the referee will consume all the cake. It is therefore not in either parties’ best interest to request a significantly large portion. Additionally, if the total of the two requests is below 100% of the cake, the referee will take the left-over portion. The two parties will then aim to maximize their portion, however the best claim that an individual submits is dependent upon the other party’s claim. There are two interacting optimization problems (Skyrms 3, 4).
Saunders would get an incentive for going below target and profits would be penalized if costs go above. For example, if the agreed upon target cost is $150,000 and Saunders meets the target, Saunders would get a $10,000 incentive. If the actual cost goes below target, let’s say $145,000, Saunders would receive an extra $5,000 in addition to the $10,000 incentive. This would, in theory, motivate Saunders to lower the price on the gatherer
b. Total molasses shipped from each refinery to each customer must be equal to the quantity required by that customer.
After the failed International Trade Organization, Rodrik discusses the Bretton Woods Agreement, the transition from the General Agreement on Tariffs and T...
While free trade has certainly changed with advances in technology and the ability to create external economies, the concept seems to be the most benign way for countries to trade with one another. Factoring in that imperfect competition and increasing returns challenge the concept of comparative advantage in modern international trade markets, the resulting introduction of government policies to regulate trade seems to result in increased tensions between countries as individual nations seek to gain advantages at the cost of others. While classical trade optimism may be somewhat naïve, the alternatives are risky and potentially harmful.
Happy Chips, Inc. is faced with a serious problem, with only having one mass merchandise customer called “Buy 4 Less” being unhappy with the company’s operating performance. Buy 4 Less had several problems cited including frequent stock outs, poor customer service responsiveness, and high prices for the products being supplied. Buy 4 Less came up with solutions they think seem fit to fix the problems they found with Happy Chips, Inc. and if Happy Chips, Inc. wishes to remain a supplier to their company they will have to incorporate these changes. The problem however with this scenario, is that employees of Happy Chip, Inc. are not happy with the demands Buy 4 Less has bestowed upon them which include providing direct store delivery four times a week instead of three, installing an automated order inquiry system to increase customer service responsiveness, and decreasing product prices by 5%. Even though the easiest thing for Happy Chips, Inc. to do is to agree to the changes Buy 4 Less wants them to do, Wendell Worthmann, the manager of logistics cost analysis doesn’t agree to the changes right away. The main problem with this case is that Buy 4 Less is Happy Chips, Inc. one and only mass merchandise customer that accounts for 400,000 annual unit sales and 12% of annual revenue. With the mass merchandise segment having such a high profit potential, Happy Chips, Inc.
No single firm can influence market price in a competitive industry; therefore a firm’s demand curve is perfectly elastic and price equals marginal revenue. Short-run profit maximization by a competitive firm can be analyzed by comparing total revenue and total cost or applying marginal analysis. A firm maximizes its short-run profit by producing that output at which total revenue exceeds total cost by the greatest amount.
below, if firm X decides to lower its price from B to D, sales should
With so much focus on the positive elements of free trade, the negative aspects of an open system are often overlooked. However, they do exist, and protectionism is needed. Consequently, safeguards are built into the system. States look out for their own good, whether that is through the use of escape clauses or the choice of the optimal forum for dispute settlement based on the precedent they do or do not want set. This paper argues that protectionism is valuable and inherent in the current system; however, not enough. Powerful states exploit weaker states, and “free trade” exacerbates the problem. I will first discuss why free trade does not work. Then, I will explain how the current system enables the inherent protectionist attitude of states. Finally, I will analyze the fairness of the system.
All nations can get the benefits of free trade by being specialized in producing goods they have a comparative advantage and then trade them with goods produced by other nations in the world. This is evidenced by comparative advantage theory. Trade depends on many factors, country's history, institution, size and. geographical position and many more. Also, the countries put trade barriers for the exchange of their goods and services with other nations in order to protect their own company from foreign competition, or to protect consumers from undesirable products, or sometimes it may be inadvertent.
The Law of Comparative Advantage was introduced by David Ricardo in 1817 in his book ‘Principles of Political Economy and Taxation’. According to this classical theory, a comparative advantage exists for a country when it has a margin of superiority in the production of a certain commodity over others. Comparative advantage results from differing endowments in the factors of production like technology, natural endowments, climate, etc. among different countries. Therefore, each country exports the commodities which it can produce at a lower opportunity cost or, in other words, lower marginal cost of production and imports the rest. This would ultimately be beneficial for all countries engaging in free trade as each would gain through its specialization
We begin our study of free trade by understanding the four principles of individual decision making.... ... middle of paper ... ... Edge, Ken, “Free trade and Protection: advantages and disadvantages of free trade” NSW HSC online http://www.hsc.csu.edu.au/economics/global_economy/tut7/Tutorial7.html#more Accessed November 29, 2011. Net Aparijita, Sinha, “What are the disadvantages of free trade?
...y supply and this causes the collapse in the U.S. and elsewhere (Pinnell, Lecture notes, 3/23). Consequently, countries become very protectionist to protect firms at home and international trade collapses (Pinnell, Lecture notes, 3/23). Therefore, states must make decisions with reciprocity and consequences in mind (Pinnell, Lecture notes, 3/23).
Therefore, to achieve this objective, managers have to make choices in decision-making, which is the process of selecting a course of action from two or more alternatives (Weihrich & Koontz; 1994, 199). A sound decision making requires extensive knowledge of economic theory and the tools of economic analysis, that are directly related in the process of decision-making. Since managerial economics is concerned with such economic theories and tools of analysis, it is very relevant to the managerial decision-making process.