Voluntary Export Restraints in the Presence of Monopoly Power
When there is a single domestic import-competing firm, there will always exist a voluntary export restraint that is superior to free trade both for the domestic firm and for all foreign suppliers as a group. The optimal voluntary export restraint for the domestic firm is smaller than the optimal voluntary export restraint for the foreigner. The first proposition implies likely voluntary export restraint proliferation in concentrated industries, but the second proposition suggests a conflict of interest inhibiting voluntary export restraints. Other forces (the incentive for new entrants, the domestic government's objectives, and dynamic changes) may further undermine the incentive for, and stability of, voluntary export restraints in concentrated industries. The argument is illustrated by empirical evidence from the automobile and VCR industries. Copyright 1989 by WWZ and Helbing & Lichtenhahn Verlag AG
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Volume (Year): 42 (1989)
Issue (Month): 1 ()
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