Strategic Trade Policy with Endogenous Choice of Quality and Asymmetric Costs
Abstract
This paper examines the strategic trade policy incentives for investment policies towards quality improvements in a vertically differentiated exporting industry. Firms first compete in qualities and then export to a third country market based on Bertrand or Cournot competition. Optimal policies are asymmetric across the two producing countries. Under Bertrand competition, the low-quality country subsidizes investment to raise export quality, while the high-quality country imposes a tax so as to reduce the quality of its already high quality exports. Under Cournot competition, the results are reversed with a tax in the low-quality country and a subsidy in the high-quality country.Download Info
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 7536.Length:
Date of creation: Feb 2000
Date of revision:
Handle: RePEc:nbr:nberwo:7536
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Keywords:Other versions of this item:
- Zhou, Dongsheng & Spencer, Barbara J. & Vertinsky, Ilan, 2002. "Strategic trade policy with endogenous choice of quality and asymmetric costs," Journal of International Economics, Elsevier, vol. 56(1), pages 205-232, January.
- F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies
- F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
This paper has been announced in the following NEP Reports:
- NEP-ALL-2000-02-14 (All new papers)
- NEP-IND-2000-02-15 (Industrial Organization)
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