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Strategic Trade Policy and Vertical Structure

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  • Ziss, Steffen

Abstract

We introduce intermediaries into the Brander-Spencer model of strategic trade policy. A key finding is that in regimes involving independent retailers, output competition and linear pricing (and two-part tariffs under certain restrictions), the optimal policy involves an export tax instead of a subsidy. If firms commit to vertical structure before governments commit to policy then under output competition firms choose integration, whereas if policy precedes structure then at least one firm chooses separation. Under price competition separation is a dominant strategy regardless of whether the structure decision is made before or after the policy decision. Copyright 1997 by Blackwell Publishing Ltd.

Suggested Citation

  • Ziss, Steffen, 1997. "Strategic Trade Policy and Vertical Structure," Review of International Economics, Wiley Blackwell, vol. 5(1), pages 142-152, February.
    • Handle: RePEc:bla:reviec:v:5:y:1997:i:1:p:142-52
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    Cited by:

    1. Choi, Kangsik & Lim, Seonyoung, 2014. "Strategic Trade Policies with Endogenous Choice of Competition Mode under a Vertical Structure," MPRA Paper 59074, University Library of Munich, Germany.
    2. Luciano Fanti & Domenico Buccella, 2023. "Vertical industry and strategic trade policy," SN Business & Economics, Springer, vol. 3(2), pages 1-16, February.
    3. Lee, Ki-Dong & Choi, Kangsik, 2023. "Optimal tariffs with endogenous vertical structure: Uniform versus discriminatory tariffs," Mathematical Social Sciences, Elsevier, vol. 124(C), pages 35-50.
    4. Sonali Deraniyagala & Ben Fine, 2000. "New Trade Theory Versus Old Trade Policy: A Continuing Enigma," Working Papers 102, Department of Economics, SOAS University of London, UK.
    5. Gjermund Nese & Odd Straume, 2007. "Industry Concentration and Strategic Trade Policy in Successive Oligopoly," Journal of Industry, Competition and Trade, Springer, vol. 7(1), pages 31-52, March.
    6. Laixun Zhao, 2000. "Decentralization and Transfer Pricing Under Oligopoly," Southern Economic Journal, John Wiley & Sons, vol. 67(2), pages 414-426, October.
    7. Gjermund Nese & Odd Straume, 2007. "Industry Concentration and Strategic Trade Policy in Successive Oligopoly," Experimental Economics, Springer;Economic Science Association, vol. 7(1), pages 31-52, March.
    8. Ki‐Dong Lee & Kangsik Choi & DongJoon Lee, 2020. "Endogenous vertical structure and trade policy in an import‐competing market," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 41(8), pages 1431-1445, December.
    9. Kangsik Choi & Ki‐Dong Lee, 2022. "Strategic delegation and network externalities under export rivalry market," Manchester School, University of Manchester, vol. 90(1), pages 1-19, January.

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