Export Subsidies and Countervailing Duties Under Asymmetric Information
AbstractThis paper explores the role of information in the formulation of trade policy for home and foreign country, in a setting in which the home government chooses its subsidy level first after which the foreign firm retaliates by imposing tariffs on its imports. We consider an environment in which home firm costs are private information but it can signal these costs to both policymakers and the foreign firm by choosing the appropriate output level. We show that a low-cost home firm has an incentive to misrepresent itself as high-cost. This is understood by the foreign firm and both policymakers and results in the home government setting a higher subsidy in the signalling case compared to the case when the home firm's output was not a signal of its costs; the foreign government sets the same tariff in both cases.
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 Department of Economics, University of Kent in its series Studies in Economics with number 0410.
Date of creation: Sep 2004
Date of revision:
Contact details of provider:
Postal: Department of Economics, University of Kent at Canterbury, Canterbury, Kent, CT2 7NP
Phone: +44 (0)1227 764000
Fax: +44 (0)1227 827850
Web page: http://www.ukc.ac.uk/economics/
Find related papers by JEL classification:
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
- F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies
- F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
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.:
- Collie, D., 1990.
"Export Subsidies And Countervailing Tariffs,"
The Warwick Economics Research Paper Series (TWERPS)
353, University of Warwick, Department of Economics.
- Dixit, Avinash, 1988. "Anti-dumping and countervailing duties under oligopoly," European Economic Review, Elsevier, vol. 32(1), pages 55-68, January.
- Leonard K. Cheng & Larry D. Qiu & Kit Pong Wong, 2001. "Anti-dumping measures as a tool of protectionism: A mechanism design approach," Canadian Journal of Economics, Canadian Economics Association, vol. 34(3), pages 639-660, August.
- 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.
- James A. Brander & Barbara J. Spencer, 1984. "Export Subsidies and International Market Share Rivalry," NBER Working Papers 1464, National Bureau of Economic Research, Inc.
- Robert Staiger & Frank Wolak, 1994.
"Measuring Industry Specific Protection: Antidumping in the United States,"
- Robert W. Staiger & Frank A. Wolak, 1994. "Measuring Industry Specific Protection: Antidumping in the United States," NBER Working Papers 4696, National Bureau of Economic Research, Inc.
- Staiger, Robert W. & Wolak, Frank A., 1992.
"The effect of domestic antidumping law in the presence of foreign monopoly,"
Journal of International Economics,
Elsevier, vol. 32(3-4), pages 265-287, May.
- Staiger, R.W. & Wolak, F.A., 1990. "The Effec Of Domestic Antidumping Law In The Presence Of Foreign Monopoly," Working Papers e-90-8, Hoover Institution, Stanford University.
- Robert W. Staiger & Frank A. Wolak, 1990. "The Effect of Domestic Antidumping Law in the Presence of Foreign Monopoly," NBER Working Papers 3254, National Bureau of Economic Research, Inc.
- Donald Wright, .
"Strategic Trade Policy and Signalling with Unobservable Costs,"
95/6, Department of Economics, University of York.
- Wright, Donald J, 1998. "Strategic Trade Policy and Signalling with Unobservable Costs," Review of International Economics, Wiley Blackwell, vol. 6(1), pages 105-19, February.
- Wright, D.J., 1994. "Strategic Trade Policy and Signalling with Unobservable Costs," Working Papers 198, University of Sydney, School of Economics.
- Mustafa Caglayan & Murat Usman, 2003.
"Incompletely Informed Policymakers and Trade Policy in Oligopolistic Industries,"
2003_06, University of Liverpool Management School.
- Mustafa Caglayan & Murat Usman, 2004. "Incompletely informed policymakers and trade policy in oligopolistic industries," Manchester School, University of Manchester, vol. 72(3), pages 283-297, 06.
- Shivakumar, Ram, 1993. "Strategic trade policy : Choosing between export subsidies and export quotas under uncertainty," Journal of International Economics, Elsevier, vol. 35(1-2), pages 169-183, August.
- Qui, Larry D., 1994. "Optimal strategic trade policy under asymmetric information," Journal of International Economics, Elsevier, vol. 36(3-4), pages 333-354, May.
- Cooper, R. & Riezman, R., 1988.
"Uncertainty And The Choice Of Trade Policy In Oligopolistic Industries,"
e-88-16, Hoover Institution, Stanford University.
- Cooper, Russell & Riezman, Raymond, 1989. "Uncertainty and the Choice of Trade Policy in Oligopolistic Industrie s," Review of Economic Studies, Wiley Blackwell, vol. 56(1), pages 129-40, January.
- 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.
- Collie, David & Hviid, Morten, 1993. " Export Subsidies as Signals of Competitiveness," Scandinavian Journal of Economics, Wiley Blackwell, vol. 95(3), pages 327-39.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Emma Robinson).
If references are entirely missing, you can add them using this form.