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Can Governments Reverse First-Mover Advantages of Foreign Competitors?

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  • Armando Jose Garcia Pires

    ()
    (Institute for Research in Economics (SNF))

Abstract

We show that governments can use export subsidies to reduce or even reverse the first-mover advantages of foreign competitors. In particular, if the cost disadvantage of Stackelberg followers relatively to Stackelberg leaders is not too large, the export subsidy makes the former produce more than the latter. Welfare unambiguously increases in countries with Stackelberg followers and in consumer countries, but decreases in countries with Stackelberg leaders. In turn, depending on the relative difference in cost competitiveness between leaders and followers, welfare can either increase or decrease in the world economy.

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File URL: http://www.accessecon.com/Pubs/EB/2012/Volume32/EB-12-V32-I2-P147.pdf
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Bibliographic Info

Article provided by AccessEcon in its journal Economics Bulletin.

Volume (Year): 32 (2012)
Issue (Month): 2 ()
Pages: 1527-1536

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Handle: RePEc:ebl:ecbull:eb-11-00788

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Keywords: Export Subsidies; First-Mover Advantages; Asymmetric Competitiveness.;

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  1. James A. Brander & Barbara J. Spencer, 1984. "Export Subsidies and International Market Share Rivalry," NBER Working Papers 1464, National Bureau of Economic Research, Inc.
  2. Neary, J. Peter, 1994. "Cost asymmetries in international subsidy games: Should governments help winners or losers?," Journal of International Economics, Elsevier, vol. 37(3-4), pages 197-218, November.
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