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Optimal Export Policy for a New-Product Monopoly

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Author Info
Bagwell, Kyle

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Abstract

A new welfare-enhancing role is identified for a policy of export subsidization in a new-product industry. An export-subsidy policy promotes the (rational) perception that a high-quality export can be provided at a relatively low price. Thus, an export subsidy generates a first-order benefit to welfare by enabling a high-quality export to be sold at a less-distorted high price. The subsidy will also introduce distortions into the price of a low-quality export and the quality-selection process. Since these choices are initially undistorted, however, the export-country welfare loss arising from new distortions is of second-order importance. Copyright 1991 by American Economic Association.

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Publisher Info
Article provided by American Economic Association in its journal American Economic Review.

Volume (Year): 81 (1991)
Issue (Month): 5 (December)
Pages: 1156-69
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Handle: RePEc:aea:aecrev:v:81:y:1991:i:5:p:1156-69

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Grossman, Gene M & Horn, Henrik, 1988. "Infant-Industry Protection Reconsidered: The Case of Informational Barriers to Entry," The Quarterly Journal of Economics, MIT Press, vol. 103(4), pages 767-87, November. [Downloadable!] (restricted)
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  2. Brander, James A. & Spencer, Barbara J., 1985. "Export subsidies and international market share rivalry," Journal of International Economics, Elsevier, vol. 18(1-2), pages 83-100, February. [Downloadable!] (restricted)
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  3. Bagwell, Kyle & Riordan, Michael H, 1991. "High and Declining Prices Signal Product Quality," American Economic Review, American Economic Association, vol. 81(1), pages 224-39, March. [Downloadable!] (restricted)
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  4. Milgrom, Paul & Roberts, John, 1986. "Price and Advertising Signals of Product Quality," Journal of Political Economy, University of Chicago Press, vol. 94(4), pages 796-821, August. [Downloadable!] (restricted)
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  5. Grossman, G.N., 1989. "Promoting New Industrial Activities: A Survey Of Recent Arguments And Evidence," Papers 147, Princeton, Woodrow Wilson School - Public and International Affairs.
  6. Kreps, David M & Wilson, Robert, 1982. "Sequential Equilibria," Econometrica, Econometric Society, vol. 50(4), pages 863-94, July. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Mohd Amin, 2004. "Sensitivity of Tariffs and Quotas: A Signaling Game," International Trade 0401003, EconWPA. [Downloadable!]
  2. C. Simon Fan & Yifan Hu, 2006. "A Signaling Model of Quality and Export: with application to dumping," DEGIT Conference Papers c011_058, DEGIT, Dynamics, Economic Growth, and International Trade. [Downloadable!]
  3. Axel F. A. Adam-Müller & Kit Pong Wong, 2002. "Restricted Export Flexibility and Risk Management with Options and Futures," CoFE Discussion Paper 02-07, Center of Finance and Econometrics, University of Konstanz. [Downloadable!]
  4. Young-Han Kim, 1999. "The Welfare Analysis Of Trade Policies: The Optimal Government Intervention Timing Under Incomplete Information," International Economic Journal, Korean International Economic Association, vol. 13(4), pages 53-70, December. [Downloadable!] (restricted)
  5. Stephan, Levy, 2004. "Best-price Guarantees as a Quality Signal," MPRA Paper 13466, University Library of Munich, Germany, revised 02 Nov 2004. [Downloadable!]
  6. Kyle Bagwell, 1991. "Pricing to Signal Product Line Quality," Discussion Papers 921, Northwestern University, Center for Mathematical Studies in Economics and Management Science. [Downloadable!]
    Other versions:
  7. Mihir A. Desai & James R. Hines Jr., 2004. "Market Reactions to Export Subsidies," NBER Working Papers 10233, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  8. Raff, Horst & von der Ruhr, Marc, 2001. "Foreign Direct Investment in Producer Services: Theory and Empirical Evidence," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
    Other versions:
  9. F. Adriani & LG. Deidda, 2006. "The Monopolist’s Blues," Working Paper CRENoS 200611, Centre for North South Economic Research, University of Cagliari and Sassari, Sardinia. [Downloadable!]
  10. Hwan C. Lin, 1996. "Targeted Tariff Protection, Monopolistic Competition And Demand Interdependence," International Economic Journal, Korean International Economic Association, vol. 10(2), pages 25-49, June. [Downloadable!] (restricted)
  11. Adriani, Fabrizio & Deidda, Luca, 2008. "Competition and the signaling role of prices," MPRA Paper 16108, University Library of Munich, Germany. [Downloadable!]
  12. Dinopoulos, Elias & Livanis, Grigorios & West, Carol, 2005. "How Cool is C.O.O.L.?," Working Papers 15658, University of Florida, International Agricultural Trade and Policy Center. [Downloadable!]
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