Last One Out Wins: Trade Policy in an International Exit Game
AbstractThis paper examines the effect of government intervention on the order and timing of firm exit in an international industry with fixed costs and declined demand. A dynamic inconsistency problem arises when the government is unable to precommit to a path of policy: it always intervenes to prolong the viability of the firm located in its market, even when the firm's survival is not the socially optimal outcome. The effect of tariff intervention is in all cases to terminate market operation prematurely, and in many cases to reverse the order of firm exit. Intervention in the absence of precommittment is never first best, and actually reduces welfare relative to the free market equilibrium when the differential between firms' fixed costs is large.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 3553.
Date of creation: Dec 1990
Date of revision:
Publication status: published as International Economic Review, Feb. 1994, vo. 35, no. 1
Note: ITI IFM
Contact details of provider:
Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
Web page: http://www.nber.org
More information through EDIRC
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Brainard, S. Lael & Martimort, David, 1997.
"Strategic trade policy with incompletely informed policymakers,"
Journal of International Economics, Elsevier,
Elsevier, vol. 42(1-2), pages 33-65, February.
- S. Lael Brainard & David Martimort, 1992. "Strategic Trade Policy With Incompletely Informed Policymakers," NBER Working Papers 4069, National Bureau of Economic Research, Inc.
- Brainard, S.L. & Martimort, D., 1992. "Strategic Trade Policy with Incompletely Informed Policymakers," Papers, Toulouse - GREMAQ 92.277, Toulouse - GREMAQ.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().
If references are entirely missing, you can add them using this form.