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Market Structure and the Demand for Free Trade

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Author Info
Orlando I. Balboa
Andrew F. Daughety
Jennifer F. Reinganum

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Abstract

We examine a heterogenous goods duopoly model, wherein governments simultaneously and noncooperatively choose whether or not to provide subsidies for their firms and then firms noncooperatively choose output levels, either sequentially or simultaneously. We find that government trade policy and market structure are interdependent. First, the trade regime alters traditional firm preferences over sequential versus simultaneous play. Second, different market structures influence governments' preferences about free trade versus subsidies. Further, if one of the firms is a potential leader, allowing for endogenous market structure generates equilibrium outcomes that sometimes reinforce, and sometimes counter, traditional results in the strategic trade literature. Copyright 2004 Blackwell Publishing, 350 Main Street, Malden, MA 02148, USA, and 9600 Garsington Road, Oxford OX4 2DQ, UK..

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Article provided by Blackwell Publishing in its journal Journal of Economics & Management Strategy.

Volume (Year): 13 (2004)
Issue (Month): 1 (03)
Pages: 125-150
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Handle: RePEc:bla:jemstr:v:13:y:2004:i:1:p:125-150

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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.:
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  3. Andrew F. Daughety, 1985. "Reconsidering Cournot: The Cournot Equilibrium is Consistent," RAND Journal of Economics, The RAND Corporation, vol. 16(3), pages 368-379, Autumn. [Downloadable!] (restricted)
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  5. Sadanand, Asha & Sadanand, Venkatraman, 1996. "Firm Scale and the Endogenous Timing of Entry: a Choice between Commitment and Flexibility," Journal of Economic Theory, Elsevier, vol. 70(2), pages 516-530, August. [Downloadable!] (restricted)
  6. Sadanand, V., 1988. "Endogenously determined price-setting monopoly in an exchange economy," Journal of Economic Theory, Elsevier, vol. 46(1), pages 172-178, October. [Downloadable!] (restricted)
  7. Gal-Or, Esther, 1987. "First Mover Disadvantages with Private Information," Review of Economic Studies, Blackwell Publishing, vol. 54(2), pages 279-92, April. [Downloadable!] (restricted)
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  9. Amir, Rabah & Grilo, Isabel, 1999. "Stackelberg versus Cournot Equilibrium," Games and Economic Behavior, Elsevier, vol. 26(1), pages 1-21, January. [Downloadable!] (restricted)
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  14. Hamilton, Jonathan H. & Slutsky, Steven M., 1990. "Endogenous timing in duopoly games: Stackelberg or cournot equilibria," Games and Economic Behavior, Elsevier, vol. 2(1), pages 29-46, March. [Downloadable!] (restricted)
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  15. Fershtman, Chaim & Judd, Kenneth L, 1987. "Equilibrium Incentives in Oligopoly," American Economic Review, American Economic Association, vol. 77(5), pages 927-40, December. [Downloadable!] (restricted)
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  17. Carmichael, Calum M., 1987. "The control of export credit subsidies and its welfare consequences," Journal of International Economics, Elsevier, vol. 23(1-2), pages 1-19, August. [Downloadable!] (restricted)
  18. Gal-Or, Esther, 1985. "First Mover and Second Mover Advantages," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 26(3), pages 649-53, October. [Downloadable!] (restricted)
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  20. Robson, Arthur J, 1990. "Duopoly with Endogenous Strategic Timing: Stackelberg Regained," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 31(2), pages 263-74, May. [Downloadable!] (restricted)
  21. Makowski, Louis, 1987. "Are 'Rational Conjectures' Rational?," Journal of Industrial Economics, Blackwell Publishing, vol. 36(1), pages 35-47, September. [Downloadable!] (restricted)
  22. Daughety, Andrew F & Reinganum, Jennifer F, 1994. "Asymmetric Information Acquisition and Behavior in Role Choice Models: An Endogenously Generated Signaling Game," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 35(4), pages 795-819, November. [Downloadable!] (restricted)
  23. Krishna, Kala, 1989. "Trade restrictions as facilitating practices," Journal of International Economics, Elsevier, vol. 26(3-4), pages 251-270, May. [Downloadable!] (restricted)
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  24. Miller, Nolan H & Pazgal, Amit I, 2001. "The Equivalence of Price and Quantity Competition with Delegation," RAND Journal of Economics, The RAND Corporation, vol. 32(2), pages 284-301, Summer.
  25. Arvan, Lanny, 1991. "Flexibility versus commitment in strategic trade policy under uncertainty : A model of endogenous policy leadership," Journal of International Economics, Elsevier, vol. 31(3-4), pages 341-355, November. [Downloadable!] (restricted)
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  27. Steven D. Sklivas, 1987. "The Strategic Choice of Managerial Incentives," RAND Journal of Economics, The RAND Corporation, vol. 18(3), pages 452-458, Autumn. [Downloadable!] (restricted)
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  1. Yoad Shefi & Asher Tishler, 2005. "The Effects Of The World Defense Industry And Us Military Aid To Israel On The Israeli Defense Industry: A Differentiated Products Model," Defence and Peace Economics, Taylor and Francis Journals, vol. 16(6), pages 427-448, December. [Downloadable!] (restricted)
  2. Benny Mantin & Asher Tishler, 2004. "The structure of the defense industry and the security needs of the country: a differentiated products model," Defence and Peace Economics, Taylor and Francis Journals, vol. 15(5), pages 397-419, October. [Downloadable!] (restricted)
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