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Uncertainty and the Choice of Trade Policy in Oligopolistic Industrie s

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  • Cooper, Russell
  • Riezman, Raymond

Abstract

This paper investigates the design of trade policies in an uncertain world. Governments in two countries select between direct quantity controls and subsidies in an attempt to shift profits in favor of domestic, imperfectly competitive firms. The equilibrium of this policy game depends on the variability of the environment. In a world of certainty, both governments choose to regulate their firms through direct quantity controls. With a sufficient amount of uncertainty, both governments regulate their firms through subsidies. This result reflects an important tradeoff between the strategic advantages of direct quantity controls and flexibility gained by the use of subsidies. Copyright 1989 by The Review of Economic Studies Limited.

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Bibliographic Info

Article provided by Wiley Blackwell in its journal Review of Economic Studies.

Volume (Year): 56 (1989)
Issue (Month): 1 (January)
Pages: 129-40

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Handle: RePEc:bla:restud:v:56:y:1989:i:1:p:129-40

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Cited by:
  1. Fabio Antoniou & Phoebe Koundouri & Nikos Tsakiris, . "Information Disclosure Under Different Modes of Regulation," DEOS Working Papers 1015, Athens University of Economics and Business.
  2. Gerda Dewit & Dermot Leahy, 2001. "Rivalry In Uncertain Export Markets: Commitment Versus Flexibility," Economics, Finance and Accounting Department Working Paper Series n1050201, Department of Economics, Finance and Accounting, National University of Ireland - Maynooth.
  3. Dewit, Gerda & Leahy, Dermot, 2004. "Rivalry in uncertain export markets: commitment versus flexibility," Journal of International Economics, Elsevier, vol. 64(1), pages 195-209, October.
  4. Mustafa Caglayan & Murat Usman, 2003. "Incompletely Informed Policymakers and Trade Policy in Oligopolistic Industries," Research Papers 2003_06, University of Liverpool Management School.
  5. Roberto Hernan & Praveen Kujal, 2003. "Minimum Quality Levels And Import Tariffs," Economics Working Papers we034817, Universidad Carlos III, Departamento de Economía.
  6. Yoshino, Hisao, 2011. "Strategic trade policy and non-linear subsidy : in the case of price competition," IDE Discussion Papers 287, Institute of Developing Economies, Japan External Trade Organization(JETRO).
  7. Leahy, Dermot & Neary, J Peter, 2010. "Oligopoly and Trade," CEPR Discussion Papers 8172, C.E.P.R. Discussion Papers.
  8. Hung-Yi Chen & Hong Hwang, 2006. "Tariffs versus Quotas under Market Price Uncertainty," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 142(1), pages 181-194, April.
  9. Roberto Hernán & Praveen Kujal, 2004. "Market Access And Minimum Quality Standards," Economics Working Papers we042608, Universidad Carlos III, Departamento de Economía.
  10. Fernando Mesa, 2009. "Piecemeal Oligopoly, Exchange Rate Uncertainty, and Trade Policy," REVISTA DE ECONOMÍA DEL ROSARIO, UNIVERSIDAD DEL ROSARIO.
  11. Garcia Pires, Armando José, 2006. "Losers, Winners and Prisoner's Dilemma in International Subsidy Wars," CEPR Discussion Papers 5979, C.E.P.R. Discussion Papers.
  12. Bernardo Moreno Jiménez & José Luis Torres Chacón, 2005. "Output subsidies and quotas under uncertainty and firm heterogeneity," Economic Working Papers at Centro de Estudios Andaluces E2005/24, Centro de Estudios Andaluces.
  13. José J. Sempere Monerris & Rafael Moner Colonques & Amparo Urbano Salvador, 1999. "Strategic policy and international economic integration," Working Papers. Serie AD 1999-05, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
  14. Matloob Piracha, 2004. "Export Subsidies and Countervailing Duties Under Asymmetric Information," Studies in Economics 0410, Department of Economics, University of Kent.
  15. Antoniou, Fabio & Tsakiris, Nikos, 2011. "Information and disclosure in strategic trade policy: Revisited," MPRA Paper 32949, University Library of Munich, Germany.
  16. Kit Wong & Kong Chow, 1997. "Endogenous Sequencing in Strategic Trade Policy Games Under Uncertainty," Open Economies Review, Springer, vol. 8(4), pages 353-369, October.
  17. Vargas Andrés José, 2001. "Strategic Interaction of International Markets: An Application to the Dairy Market," REVISTA DESARROLLO Y SOCIEDAD, UNIVERSIDAD DE LOS ANDES-CEDE.

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