Strategic Trade Policy and Mode of Competition: Symmetric versus Asymmetric Information
نویسنده
چکیده
In this paper, we analyze the following policy dilemma: strategic trade policy versus free trade when the domestic government is bound to intervene only after the domestic firm's strategic variable is chosen. This intervention allows the domestic firm to manipulate the domestic government and results in a socially inefficient choice of the strategic variable. However, commitment to free trade leads to forgoing the benefits from profit-shifting. Yet, from the social point of view, free trade may be optimal even under the assumption of symmetric information. Due to costly signaling, this result is reinforced in the case of asymmetric information.
منابع مشابه
Transit versus (Paid) Peering: Interconnection and Competition in the Internet Backbone Market
We examine the strategic interaction between interconnection and competition in the Internet backbone market. Networks asymmetric in size choose among different interconnection regimes, IP-Transit, Bill-and-Keep Peering, and Paid Peering, and compete for end-users. We show that sufficiently symmetric networks enter a Peering agreement while otherwise use an intermediary network for exchanging t...
متن کاملOptimal Strategic Trade Policy under Asymmetric Information
When cost is private information in the Brander{Spencer model, the home government is confronted by a decision of choosing between two policy options: a menu of policies and a uniform policy. The former induces separation and so reveals the cost information to the foreign competitors. The latter helps the weak ̄rm by concealing the cost information. The main result from this study is that polic...
متن کاملStrategic Trade Policy, Spillovers, and Uncertain Mode of Competition:Cournot versus Bertrand*
In this paper we discuss the incentives of a welfare maximizing government to implement strategic trade policy when there is, on the one hand, uncertainty about the relevant market information (like the type of competition, demand function, cost function, etc.), but, on the other hand, the environment of the contest between the firms is specific: there are two firms and the interaction among th...
متن کاملStrategic Trade and Delegated Competition∗
Strategic trade theory has been criticized on the grounds that its predictions are overly sensitive to modeling assumptions. Applying recent results in duopoly theory, this paper considers three-stage games in which governments choose subsidies, firms’ owners choose incentive schemes for their managers, and then the managers compete in the product market. We show that if firms’ owners have suff...
متن کاملInternational competition in vertically differentiated markets with innovation and imitation: Trade policy versus Free trade∗
The important characteristic of international competition between firms from developed and less developed countries is vertical product differentiation, where firms’ quality choices are strategic decisions. We consider a model with sequential quality choice and the possibility of imitation, and compare positive and normative aspects of this setup in free trade and under strategic trade policy. ...
متن کاملذخیره در منابع من
با ذخیره ی این منبع در منابع من، دسترسی به آن را برای استفاده های بعدی آسان تر کنید
عنوان ژورنال:
دوره شماره
صفحات -
تاریخ انتشار 2001