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Uncertainty Resolution and Strategic Trade Policy in Oligopolistic Industries

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  • Mustafa Caglayan

Abstract

This paper investigates a government’s choice of strategic trade policy when the domestic firm observes a private noisy signal about the stochastic market demand while in competition with a rival firm. The government chooses between quantity controls and subsidies to maximize profits of the domestic firm. Assuming that firms compete à la Cournot in a third country, it is shown that the optimal trade policy depends not only on demand uncertainty but also on the predictability of the true market demand by the firms.

Suggested Citation

  • Mustafa Caglayan, 2000. "Uncertainty Resolution and Strategic Trade Policy in Oligopolistic Industries," Review of International Economics, Wiley Blackwell, vol. 8(2), pages 311-318, May.
    • Handle: RePEc:bla:reviec:v:8:y:2000:i:2:p:311-318
    DOI: 10.1111/1467-9396.00223
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    Cited by:

    1. Mustafa Caglayan & Murat Usman, 2004. "Incompletely informed policymakers and trade policy in oligopolistic industries," Manchester School, University of Manchester, vol. 72(3), pages 283-297, June.
    2. Ning, Haokai, 2020. "Strategic Trade Policy in Reciprocal Dumping Model with Incomplete Information," MPRA Paper 101530, University Library of Munich, Germany.
    3. Ning, Haokai, 2020. "Choice of Trade Policy with Incomplete Information," MPRA Paper 101529, University Library of Munich, Germany.

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