Find the best response functions for the countries

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Reference no: EM131252257

Consider the tariff game described.

(a) Find the best-response functions for the countries.

(b) Compute the Nash equilibrium.

(c) Show that the countries would be better off if they made a binding agreement to set lower tariffs (than in equilibrium). You do not need to speculate how such an agreement could be enforced.

(d) Using the graph of the best-response functions, determine the set of rationalizable strategies in the tariff game.

Reference no: EM131252257

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