ABSTRACT
Government policies have redistributive implications. Therefore, policy changes often invite many social and political conflicts. A striking example is the European farm subsidy program in which the level of conflict has crossed national frontiers. All the sophistication, positivity and clarity of economics starts to crumble once it is asked to explain how and why policy changes are made, particularly when redistributive issues are involved. This is so because alternative purely redistributive policies cannot be ranked by the Pareto rule, since each one of them is Pareto efficient. The existing literature on political economy has modelled the political process of conflict resolution concerning the government's policies as a noncooperative game. The bargain-theoretic approach has been adopted to study the tariff determination process under a cooperative political environment. The bargaining problem in the tariff game has been solved using the generalized Nash bargaining process in which the players may be endowed with asymmetric bargaining powers.
