This paper examines the welfare effects of the government trade policy when the government intervenes as a second mover under incomplete information. when the government decides her trade policy after an exporting firm decides its strategy, both the high quality firm (H) and the low quality firm (L) use their first mover advantage to raise the price in addition to H's upward price distortion for signaling purposes, and the government offers export subsidies to compensate for the price increase. It is shown that in the presence of a distortionary cost of raising government revenue, social welfare is highest when the govenment is a first mover, followed by non-intervention; social welfare is lowest when the government is a second mover. [F13, F12, L13]
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Volume (Year): 13 (1999) Issue (Month): 4 (December) Pages: 53-70 Download reference. The following formats are available: HTML
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