Makoto Okamura

Conjectural Variations and Voluntary Public Good Provision in a Repeated Game Setting

The purpose of this paper is to show how conjectural variations can be derived as a reduced form in an infinitely repeated game of private provision of public goods. We obtain explicit closed forms of conjectural variations associated with maximal sustainable equilibria in which the sum of the utilities of all of a communitys members is maximized for both quadratic and Cobb–Douglas preferences, provided that the resulting sequence of contributions can be sustained as a Nash (or subgame perfect) equilibrium in the underlying repeated game. We also show that positive conjectural variations will emerge as long as people place positive weight on the future, and that those conjectures are positively related to the discount factor.

Optiomal tariff policy with endogenous location choice

This paper examines the optimal tariff policy of an importing country when duopoly firms choose to export or undertake foreign direct investment (FDI). We establish that (i) the government sets its optimal tariff rate to encourage FDI when the fixed cost of FDI is low. Choosing FDI creates a Prisoners Dilemma for both firms and is not optimal for the source country; and (ii) when the fixed cost of FDI is high, the optimal tariff is set to induce both firms to choose exports.

A national-security argument for trade protection

This paper constructs a two-period model in which a domestic monopoly firm produces a good given an amount of import of the good. In the second period, the monopoly firm faces a capacity constraint with regard to its production level. The production level in the first period sets the maximum quantity for the second period. We investigate the effects of quotas on welfare to examine the economic rationale of the national-security argument for trade protection. Under decreasing marginal costs of a monopoly firm, tightening the import quota may increase the domestic consumer surplus and the social welfare.