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International Trade Policy towards Monopolies and Oligopolies

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Author Info

  • Praveen Kujal

    (Universidad Carlos III de Madrid)

  • Juan Ruiz

    (Universidad Carlos III de Madrid)

Abstract

We study the effect of market structure upon international trade policy when firms invest in process R&D before competing in a differentiated goods market. For a domestic monopoly, and increasing the number of foreign firms, the government either chooses a R&D (and output) subsidy, or remains inactive. For a domestic duopoly a government taxes, subsidizes, or does not promote R&D depending upon the number of domestic firms and the degree of product differentiation. R&D (and output) is taxed for high levels of product differentiation. For lower levels of product differentiation only one country may subsidize in equilibrium. Further, the results are robust to Cournot or Bertrand competition.

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File URL: http://128.118.178.162/eps/it/papers/0302/0302002.pdf
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Bibliographic Info

Paper provided by EconWPA in its series International Trade with number 0302002.

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Length: 20 pages
Date of creation: 04 Feb 2003
Date of revision: 17 Mar 2003
Handle: RePEc:wpa:wuwpit:0302002

Note: Type of Document - pdf file; prepared on Scientific Workplace; to print on any printer; pages: 20 ; figures: included in text
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Web page: http://128.118.178.162

Related research

Keywords: Product Differentiation; Strategic Trade Policy; Policy Reversals; R&D subsidies; monopoly; duopoly.;

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References

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  1. Dixit, Avinash K., 1978. "A Model of Duopoly Suggesting a Theory of Entry Barriers," The Warwick Economics Research Paper Series (TWERPS) 125, University of Warwick, Department of Economics.
  2. D Leahy & J.P. Neary, 1995. "Public Policy Towards R&D in Oligopolistic Industries," CEP Discussion Papers dp0270, Centre for Economic Performance, LSE.
  3. Bester, H. & Petrakis, E., 1991. "The Incentives for Cost Reduction in a Differentiated Industry," Papers 9136, Tilburg - Center for Economic Research.
  4. Leahy, Dermot & Neary, J Peter, 1996. "International R&D Rivalry and Industrial Strategy without Government Commitment," Review of International Economics, Wiley Blackwell, vol. 4(3), pages 322-38, October.
  5. Dixit, Avinash, 1984. "International Trade Policy for Oligopolistic Industries," Economic Journal, Royal Economic Society, vol. 94(376a), pages 1-16, Supplemen.
  6. Eaton, Jonathan & Grossman, Gene M, 1986. "Optimal Trade and Industrial Policy under Oligopoly," The Quarterly Journal of Economics, MIT Press, vol. 101(2), pages 383-406, May.
  7. Celia COSTA CABRAL & Praveen KUJAL & Emmanuel PETRAKIS, 1998. "Incentives for Cost Reducing Innovations under Quantitative Import Restraints," Annales d'Economie et de Statistique, ENSAE, issue 49-50, pages 479-493.
  8. Krishna, K. & Thursby, M., 1991. "Optimal Polocies with Strategic Distortions," Purdue University Economics Working Papers 1004, Purdue University, Department of Economics.
  9. Barbara J. Spencer & James A. Brander, 1982. "Tariff Protection and Imperfect Competition," Working Papers 517, Queen's University, Department of Economics.
  10. 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.
  11. Barbara J. Spencer & James A. Brander, 1983. "International R&D Rivalry and Industrial Strategy," NBER Working Papers 1192, National Bureau of Economic Research, Inc.
  12. Maggi, Giovanni, 1996. "Strategic Trade Policies with Endogenous Mode of Competition," American Economic Review, American Economic Association, vol. 86(1), pages 237-58, March.
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