Title

Optimal Export Subsidy When Demand is Uncertain

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.

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

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