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Strategic Trade and Industrial Policy towards Dynamic Oligopolies

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Author Info
Neary, J Peter
Leahy, Dermot

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Abstract

We characterise optimal trade and industrial policy in dynamic oligopolistic markets. If governments can commit to future policies, optimal first-period intervention should diverge from the profit-shifting benchmark to an extent which exactly offsets the strategic behaviour implied by Fudenberg and Tirole's "animal spirits" taxonomy of business strategies. Without government commitment, there is an additional basis for intervention, whose sign depends on the strategic substitutability between future policy and current actions. We consider a variety of applications (to R&D spillovers, consumer switching costs, etc.) and also extensions to constrained second-best policies.

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Article provided by Royal Economic Society in its journal The Economic Journal.

Volume (Year): 110 (2000)
Issue (Month): 463 (April)
Pages: 484-508
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Handle: RePEc:ecj:econjl:v:110:y:2000:i:463:p:484-508

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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  2. Gruenspecht, Howard K., 1988. "Export subsidies for differentiated products," Journal of International Economics, Elsevier, vol. 24(3-4), pages 331-344, May. [Downloadable!] (restricted)
  3. Vives, Xavier, 1989. "Technological competition, uncertainty, and oligopoly," Journal of Economic Theory, Elsevier, vol. 48(2), pages 386-415, August. [Downloadable!] (restricted)
  4. J Peter Neary; & Paul O'Sullivan, 1997. "Beat 'em or Join 'em?: Export Subsidies Versus International Research Joint Ventures in Oligopolistic Markets," Economics, Finance and Accounting Department Working Paper Series n700897, Department of Economics, Finance and Accounting, National University of Ireland - Maynooth.
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  5. J.P Neary & D Leahy, 1995. "Learning by Doing," CEP Discussion Papers 0251, Centre for Economic Performance, LSE.
  6. Brander, James A. & Spencer, Barbara J., 1985. "Export subsidies and international market share rivalry," Journal of International Economics, Elsevier, vol. 18(1-2), pages 83-100, February. [Downloadable!] (restricted)
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  7. Eaton, Jonathan & Grossman, Gene M, 1986. "Optimal Trade and Industrial Policy under Oligopoly," The Quarterly Journal of Economics, MIT Press, vol. 101(2), pages 383-406, May. [Downloadable!] (restricted)
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  8. Klemperer, Paul, 1995. "Competition When Consumers Have Switching Costs: An Overview with Applications to Industrial Organization, Macroeconomics, and International Trade," Review of Economic Studies, Blackwell Publishing, vol. 62(4), pages 515-39, October. [Downloadable!] (restricted)
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  11. To, Theodore, 1994. "Export subsidies and oligopoly with switching costs," Journal of International Economics, Elsevier, vol. 37(1-2), pages 97-110, August. [Downloadable!] (restricted)
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  12. Leahy, Dermot & Neary, J Peter, 1996. "International R&D Rivalry and Industrial Strategy without Government Commitment," Review of International Economics, Blackwell Publishing, vol. 4(3), pages 322-38, October.
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  13. A. M. Spence, 1981. "The Learning Curve and Competition," Bell Journal of Economics, The RAND Corporation, vol. 12(1), pages 49-70, Spring. [Downloadable!] (restricted)
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  19. Dixit, Avinash K. & Grossman, Gene M., 1986. "Targeted export promotion with several oligopolistic industries," Journal of International Economics, Elsevier, vol. 21(3-4), pages 233-249, November. [Downloadable!] (restricted)
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  20. D Leahy & J.P Neary, 1997. "R&D Spillovers and the Case for Industrial Policy in an Open Economy," CEP Discussion Papers 0345, Centre for Economic Performance, LSE. [Downloadable!]
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  21. James A. Brander, 1995. "Strategic Trade Policy," NBER Working Papers 5020, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  22. Leahy, Dermot & Neary, J Peter, 1997. "Public Policy towards R&D in Oligopolistic Industries," American Economic Review, American Economic Association, vol. 87(4), pages 642-62, September. [Downloadable!] (restricted)
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  23. Karp, Larry S. & Perloff, Jeffrey M., 1995. "The failure of strategic industrial policies due to manipulation by firms," International Review of Economics & Finance, Elsevier, vol. 4(1), pages 1-16. [Downloadable!] (restricted)
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  25. 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. [Downloadable!] (restricted)
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  26. Neary, J Peter, 1995. "Trade Liberalisation and Shadow Prices in the Presence of Tariffs and Quotas," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 36(3), pages 531-54, August. [Downloadable!] (restricted)
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  27. Dixit, Avinash, 1980. "The Role of Investment in Entry-Deterrence," Economic Journal, Royal Economic Society, vol. 90(357), pages 95-106, March. [Downloadable!] (restricted)
  28. Neary, J Peter, 1989. "Export Subsidies and Price Competition," CEPR Discussion Papers 327, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  29. Fudenberg, Drew & Tirole, Jean, 1984. "The Fat-Cat Effect, the Puppy-Dog Ploy, and the Lean and Hungry Look," American Economic Review, American Economic Association, vol. 74(2), pages 361-66, May. [Downloadable!] (restricted)
  30. Maggi, Giovanni, 1996. "Strategic Trade Policies with Endogenous Mode of Competition," American Economic Review, American Economic Association, vol. 86(1), pages 237-58, March. [Downloadable!] (restricted)
  31. Brander, James A. & Spencer, Barbara J., 1987. "Foreign direct investment with unemployment and endogenous taxes and tariffs," Journal of International Economics, Elsevier, vol. 22(3-4), pages 257-279, May. [Downloadable!] (restricted)
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