Farsightedly stable tariffs

• This paper explores the farsighted stable sets of the tariff game.
• The farsighted stable sets are all singletons.
• Each set is a Pareto efficient and strictly individually rational tariff profile.
• The results hold regardless of whether coalitional deviations are allowed or not.

This article analyzes the tariff negotiation game between two countries when the countries are sufficiently farsighted. It extends the research of Nakanishi (2000) and Oladi (2005) for the tariff retaliation game in which countries take into account subsequent retaliations that may occur after their own retaliation. We show that when countries are sufficiently farsighted, all farsighted stable sets of the tariff game of Nakanishi (2000) are singletons, which are Pareto efficient and strictly individually rational tariff combinations. These results hold regardless of whether coalitional deviations are allowed or not.