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Industrial Concentration Reverses the Timing in a Trade Policy Game

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Author Info
Masayuki Hayashibara ()
Abstract

Faced with an export subsidy by a foreign government, importing countries have to decide whether they should impose countervailing duties or not. Using a Cournot duopoly model, Collie (Weltwirtschaftliches Archiv 130: 191–209) shows that the subgame perfect equilibrium occurs when the importing country sets its production subsidy and tariff at stage one and the foreign government sets its export subsidy at stage two. That is, an importing country will choose to commit itself not to use countervailing duties. In this paper, we extend Collie's duopoly model to the case of a Cournot oligopoly and show that the country in which industry is less concentrated tends to emerge as the Stackelberg leader. Copyright Kluwer Academic Publishers 2002

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File URL: http://hdl.handle.net/10.1023/A:1012215913394
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Article provided by Springer in its journal Open Economies Review.

Volume (Year): 13 (2002)
Issue (Month): 1 (January)
Pages: 73-86
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Handle: RePEc:kap:openec:v:13:y:2002:i:1:p:73-86

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Keywords: policy timing; strategic trade policy;

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  1. David Collie, 1994. "Endogenous timing in trade policy games: Should governments use countervailing duties?," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 130(1), pages 191-209, March. [Downloadable!] (restricted)
  2. Hamilton, Jonathan H. & Slutsky, Steven M., 1990. "Endogenous timing in duopoly games: Stackelberg or cournot equilibria," Games and Economic Behavior, Elsevier, vol. 2(1), pages 29-46, March. [Downloadable!] (restricted)
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  3. Hwang, Hae-Shin & Schulman, Craig T., 1993. "Strategic non-intervention and the choice of trade policy for international oligopoly," Journal of International Economics, Elsevier, vol. 34(1-2), pages 73-93, February. [Downloadable!] (restricted)
  4. Kit Wong & Kong Chow, 1997. "Endogenous Sequencing in Strategic Trade Policy Games Under Uncertainty," Open Economies Review, Springer, vol. 8(4), pages 353-369, October. [Downloadable!] (restricted)
  5. Brander, James A., 1995. "Strategic trade policy," Handbook of International Economics, in: G. M. Grossman & K. Rogoff (ed.), Handbook of International Economics, edition 1, volume 3, chapter 27, pages 1395-1455 Elsevier. [Downloadable!] (restricted)
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  6. Collie, David, 1991. "Export subsidies and countervailing tariffs," Journal of International Economics, Elsevier, vol. 31(3-4), pages 309-324, November. [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. Dixit, Avinash, 1984. "International Trade Policy for Oligopolistic Industries," Economic Journal, Royal Economic Society, vol. 94(376a), pages 1-16, Supplemen.
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