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Competition Policy as Strategic Trade with Differentiated Products

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  • Martino De Stefano
  • Marc Rysman

Abstract

The paper analyzes how countries use competition policy as a tool for strategic trade. In the model, two countries export to a third country. Each exporting country is endowed with a set of differentiated products. Each government chooses the number of exporters for its country and the products that each exporter sells in the first period, and a tax policy in the second period. Firms choose prices or quantities independently in the third period. In the unique subgame‐perfect equilibrium, both countries group all their products within a single firm—the “national champion policy.” We study the implication of different assumptions about the timing of the game.

Suggested Citation

  • Martino De Stefano & Marc Rysman, 2010. "Competition Policy as Strategic Trade with Differentiated Products," Review of International Economics, Wiley Blackwell, vol. 18(4), pages 758-771, September.
    • Handle: RePEc:bla:reviec:v:18:y:2010:i:4:p:758-771
    DOI: 10.1111/j.1467-9396.2010.00893.x
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    References listed on IDEAS

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    Cited by:

    1. Holger Breinlich & Volker Nocke & Nicolas Schutz, 2020. "Merger Policy in a Quantitative Model of International Trade," The Economic Journal, Royal Economic Society, vol. 130(626), pages 393-421.
    2. Gaubert, Cecile & Itskhoki, Oleg & Vogler, Maximilian, 2021. "Government policies in a granular global economy," Journal of Monetary Economics, Elsevier, vol. 121(C), pages 95-112.
    3. Ghosh, Arghya & Saha, Souresh, 2015. "Price competition, technology licensing and strategic trade policy," Economic Modelling, Elsevier, vol. 46(C), pages 91-99.
    4. Amrita Ray Chaudhuri & Hassan Benchekroun, 2012. "Welfare Effect of Mergers and Multilateral Trade Liberalization," Review of International Economics, Wiley Blackwell, vol. 20(1), pages 119-133, February.
    5. Breinlich, Holger & Nocke, Volker & Schutz, Nicolas, 2017. "International aspects of merger policy: A survey," International Journal of Industrial Organization, Elsevier, vol. 50(C), pages 415-429.
    6. Naoto Jinji & Tsuyoshi Toshimitsu, 2014. "Strategic Investment Subsidies under Asymmetric Oligopoly," Review of Development Economics, Wiley Blackwell, vol. 18(3), pages 490-501, August.
    7. Budzinski, Oliver, 2020. "The economics of international competition policy: New challenges in the light of digitization?," Ilmenau Economics Discussion Papers 135, Ilmenau University of Technology, Institute of Economics.

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