IDEAS home Printed from
   My bibliography  Save this article

Strategic Trade Policy and Signalling with Unobservable Costs


  • Wright, Donald J


In an environment in which home firm costs are private information, home firm output can signal these costs to a foreign competitor and a home policymaker. High-cost home firms have an incentive to misrepresent themselves as low-cost. This is understood by the foreign firm and the home policymaker and results in the first-period optimal per-unit output subsidy to the home firm being less than it would be if home firm output was not a signal of home firm costs. These results are extended to the case of simultaneous signaling and signaling through price. Copyright 1998 by Blackwell Publishing Ltd.

Suggested Citation

  • Wright, Donald J, 1998. "Strategic Trade Policy and Signalling with Unobservable Costs," Review of International Economics, Wiley Blackwell, vol. 6(1), pages 105-119, February.
  • Handle: RePEc:bla:reviec:v:6:y:1998:i:1:p:105-19

    Download full text from publisher

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a search for a similarly titled item that would be available.

    Other versions of this item:

    References listed on IDEAS

    1. Kasa, Kenneth, 1992. "Adjustment costs and pricing-to-market theory and evidence," Journal of International Economics, Elsevier, vol. 32(1-2), pages 1-30, February.
    2. Knetter, Michael M, 1989. "Price Discrimination by U.S. and German Exporters," American Economic Review, American Economic Association, vol. 79(1), pages 198-210, March.
    3. Paul Krugman, 1986. "Pricing to Market when the Exchange Rate Changes," NBER Working Papers 1926, National Bureau of Economic Research, Inc.
    4. William H. Branson & Richard C. Marston, 1989. "Price and Output Adjustment in Japanese Manufacturing," NBER Working Papers 2878, National Bureau of Economic Research, Inc.
    5. Feenstra, Robert C., 1989. "Symmetric pass-through of tariffs and exchange rates under imperfect competition: An empirical test," Journal of International Economics, Elsevier, vol. 27(1-2), pages 25-45, August.
    6. Marston, Richard C., 1990. "Pricing to market in Japanese manufacturing," Journal of International Economics, Elsevier, vol. 29(3-4), pages 217-236, November.
    7. Layard, Richard & Nickell, Stephen & Jackman, Richard, 2005. "Unemployment: Macroeconomic Performance and the Labour Market," OUP Catalogue, Oxford University Press, number 9780199279173.
    8. Eli Bekman & John Bound & Stephen Machin, 1998. "Implications of Skill-Biased Technological Change: International Evidence," The Quarterly Journal of Economics, Oxford University Press, vol. 113(4), pages 1245-1279.
    9. Edward P. Lazear, 1990. "Job Security Provisions and Employment," The Quarterly Journal of Economics, Oxford University Press, vol. 105(3), pages 699-726.
    10. Emerson, Michael, 1988. "Regulation or deregulation of the labour market : Policy regimes for the recruitment and dismissal of employees in the industrialised countries," European Economic Review, Elsevier, vol. 32(4), pages 775-817, April.
    11. Paul Krugman & Robert Lawrence, 1993. "Trade, Jobs, and Wages," NBER Working Papers 4478, National Bureau of Economic Research, Inc.
    12. Sven W. Arndt & J. David Richardson, 1987. "Real-Financial Linkages Among Open Economies," NBER Working Papers 2230, National Bureau of Economic Research, Inc.
    13. Edward E. Leamer, 1996. "In Search of Stolper-Samuelson Effects on U.S. Wages," NBER Working Papers 5427, National Bureau of Economic Research, Inc.
    14. Linda S. Goldberg & Joseph Tracy, 2001. "Exchange rates and wages," Staff Reports 116, Federal Reserve Bank of New York.
    15. Newell, A. & Symons, J. S. V., 1987. "Corporatism, laissez-faire and the rise in unemployment," European Economic Review, Elsevier, vol. 31(3), pages 567-601, April.
    16. Feinberg, Robert M, 1989. "The Effects of Foreign Exchange Movements on U.S. Domestic Prices," The Review of Economics and Statistics, MIT Press, vol. 71(3), pages 505-511, August.
    17. Paul R. Krugman & Richard E. Baldwin, 1987. "The Persistence of the U.S. Trade Deficit," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 18(1), pages 1-56.
    18. Bean, C R & Layard, P R G & Nickell, S J, 1986. "The Rise in Unemployment: A Multi-country Study," Economica, London School of Economics and Political Science, vol. 53(210(S)), pages 1-22, Supplemen.
    19. Catherine L. Mann, 1986. "Prices, profit margins, and exchange rates," Federal Reserve Bulletin, Board of Governors of the Federal Reserve System (U.S.), issue Jun, pages 366-379.
    Full references (including those not matched with items on IDEAS)


    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.

    Cited by:

    1. Sun, Ning & Yao, Hongxin, 2011. "Manipulable behavior in international trade," Economic Modelling, Elsevier, vol. 28(1-2), pages 60-66, January.
    2. Matloob Piracha, 2004. "Export Subsidies and Countervailing Duties Under Asymmetric Information," Studies in Economics 0410, School of Economics, University of Kent.
    3. Bouët, Antoine & Cassagnard, Patrice, 2013. "Strategic trade policy under asymmetric information with screening," Economic Modelling, Elsevier, vol. 32(C), pages 286-293.
    4. Gasmi, Farid & Malin, Eric & Tandé, François, 2004. "Lobbying in Antidumping," IDEI Working Papers 320, Institut d'Économie Industrielle (IDEI), Toulouse.
    5. Sonali Deraniyagala & Ben Fine, 2000. "New Trade Theory Versus Old Trade Policy: A Continuing Enigma," Working Papers 102, Department of Economics, SOAS, University of London, UK.
    6. Sun, Ning & Yao, Hongxin, 2011. "Manipulable behavior in international trade," Economic Modelling, Elsevier, vol. 28(1), pages 60-66.

    More about this item


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:reviec:v:6:y:1998:i:1:p:105-19. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wiley-Blackwell Digital Licensing) or (Christopher F. Baum). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.