Thursday
July 24, 2014

Homework Help: Microeconomics

Posted by Anonymous on Monday, October 6, 2008 at 12:57pm.

Question:

Consider trade relations between the Country A & Country B. Assume that the leaders of the two contries believe the payoffs to altrenative trade policies are as follows:

,,,,,,,,,,,,,,,,,,Country A
,,,,,,,,,,Low Tarriffs|High Tarriffs
,,,,,,,,,,A 25 Billion|A 30 Billion
Country B,,,,,,,,,,,,,|
Low ,,,,,,,,,,,,,,,,,,|
Tarriffs,,B 10 Billion|B 10 Billion
,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,
High ,,,,,A 10 billion|A 20 Billion
Tarriffs,,,,,,,,,,,,,,|
,,,,,,,,,,B 30 Billion|B 20 Billion

What is the dominate strategy for the Country A?

The maxtrix confuses me. I picked A should be with the High Tariff and gain 30 billion. I am not sure if this is correct?

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