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Optimal Export Policy for a New-Product Monopoly

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Author Info
Kyle Bagwell

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Abstract

A new welfare-enhancing role is identified for a policy of export subsidization in a new-product industry. An export subsidy policy promotes the (rational) perception that a high-quality export can be provided at a relatively low price. Thus, an export subsidy generates a first order benefit to welfare by enabling a high-quality export to be sold at a less-distorted, high price. The subsidy will also introduce distortions into the price of a low-quality export and, when product quality is policy-sensitive, the quality selection process. Since these choices are initially undistorted, however, the export-country welfare loss arising from new distortions is of second order importance.

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File URL: http://www.kellogg.northwestern.edu/research/math/papers/898.pdf
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Paper provided by Northwestern University, Center for Mathematical Studies in Economics and Management Science in its series Discussion Papers with number 898.

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Date of creation: Aug 1990
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Handle: RePEc:nwu:cmsems:898

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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.:
  1. Grossman, Gene M & Horn, Henrik, 1988. "Infant-Industry Protection Reconsidered: The Case of Informational Barriers to Entry," The Quarterly Journal of Economics, MIT Press, vol. 103(4), pages 767-87, November. [Downloadable!] (restricted)
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  2. 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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  3. Bagwell, Kyle & Riordan, Michael H, 1991. "High and Declining Prices Signal Product Quality," American Economic Review, American Economic Association, vol. 81(1), pages 224-39, March. [Downloadable!] (restricted)
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  4. Milgrom, Paul & Roberts, John, 1986. "Price and Advertising Signals of Product Quality," Journal of Political Economy, University of Chicago Press, vol. 94(4), pages 796-821, August. [Downloadable!] (restricted)
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  5. Grossman, G.N., 1989. "Promoting New Industrial Activities: A Survey Of Recent Arguments And Evidence," Papers 147, Princeton, Woodrow Wilson School - Public and International Affairs.
  6. Kreps, David M & Wilson, Robert, 1982. "Sequential Equilibria," Econometrica, Econometric Society, vol. 50(4), pages 863-94, July. [Downloadable!] (restricted)
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Cited by:
(explanations, 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.)

  1. Mohd Amin, 2004. "Sensitivity of Tariffs and Quotas: A Signaling Game," International Trade 0401003, EconWPA. [Downloadable!]
  2. C. Simon Fan & Yifan Hu, 2006. "A Signaling Model of Quality and Export: with application to dumping," DEGIT Conference Papers c011_058, DEGIT, Dynamics, Economic Growth, and International Trade. [Downloadable!]
  3. Hwan C. Lin, 1996. "Targeted Tariff Protection, Monopolistic Competition And Demand Interdependence," International Economic Journal, Korean International Economic Association, vol. 10(2), pages 25-49, June. [Downloadable!] (restricted)
  4. Axel F. A. Adam-Müller & Kit Pong Wong, 2002. "Restricted Export Flexibility and Risk Management with Options and Futures," CoFE Discussion Paper 02-07, Center of Finance and Econometrics, University of Konstanz. [Downloadable!]
  5. Young-Han Kim, 1999. "The Welfare Analysis Of Trade Policies: The Optimal Government Intervention Timing Under Incomplete Information," International Economic Journal, Korean International Economic Association, vol. 13(4), pages 53-70, December. [Downloadable!] (restricted)
  6. Kyle Bagwell, 1991. "Pricing to Signal Product Line Quality," Discussion Papers 921, Northwestern University, Center for Mathematical Studies in Economics and Management Science. [Downloadable!]
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  7. Mihir A. Desai & James R. Hines Jr., 2004. "Market Reactions to Export Subsidies," NBER Working Papers 10233, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  8. Stephen B. DeLoach & Jayoti Das, 2008. "Resolving the Paradox of Social Standards and Export Competitiveness," Working Papers 2008-03, Elon University, Department of Economics. [Downloadable!]
  9. Fabrizio Adriani & Luca G. Deidda, 2006. "The Monopolist’s Blues," Working Paper CRENoS 200611, Centre for North South Economic Research, University of Cagliari and Sassari, Sardinia. [Downloadable!]
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