Firm Strategy in a National Election: Strategic Trade Policy Implications

Firm Strategy in a National Election: Strategic Trade Policy Implications

In discussing a trade policy instrument, a game-theoretic model has been popularly utilized during the last few decades. Interactions between a government and private firms can be described as sequential because a government’s policy affects firms’ actions sequentially. Previous research studies have investigated how firms will react to a government’s policy. In fact, there is a situation in that firms should make a choice under political uncertainty. For instance, an election determines a type of government, which prefers a specific trade policy. In this case, firms can optimize their profits by anticipating election results. This study highlights firms’ reaction to a national election, which influences trade policy and offers strategic trade policy insights.