Optimal Export Subsidy When Demand is Uncertain

Author

Hiroaki Fujimoto
Eun Soo Park, Missouri University of Science and TechnologyFollow

Abstract

A standard result in export subsidy/tax game models is that if governments can credibly precommit themselves to a particular trade policy, an export subsidy (tax) is optimal when firms engage in quantity (price, respectively) competition (Brander and Spencer, 1985 Eaton and Grossman, 1986). In this paper, we consider a model of dynamic duopoly when demand in the importing country is uncertain. We show that in a symmetric equilibrium a subsidy is generally optimal for price competition.

Recommended Citation

Fujimoto, H., & Park, E. S. (1997). Optimal Export Subsidy When Demand is Uncertain. Economics Letters, 55(3), pp. 383-390. Elsevier.

The definitive version is available at https://doi.org/10.1016/S0165-1765(97)00107-9

Department(s)

Economics

Keywords and Phrases

Dynamic duopoly; F12; F13; Strategic trade policy under uncertainty

International Standard Serial Number (ISSN)

0165-1765

Document Type

Article - Journal

Document Version

Citation

File Type

text

Language(s)

English

Rights

© 1997 Elsevier, All rights reserved.

Publication Date

01 Sep 1997