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Can Governments Reverse First-Mover Advantages of Foreign Competitors?

Author

Listed:
  • Armando Jose Garcia Pires

    (Institute for Research in Economics (SNF))

Abstract

We show that governments can use export subsidies to reduce or even reverse the first-mover advantages of foreign competitors. In particular, if the cost disadvantage of Stackelberg followers relatively to Stackelberg leaders is not too large, the export subsidy makes the former produce more than the latter. Welfare unambiguously increases in countries with Stackelberg followers and in consumer countries, but decreases in countries with Stackelberg leaders. In turn, depending on the relative difference in cost competitiveness between leaders and followers, welfare can either increase or decrease in the world economy.

Suggested Citation

  • Armando Jose Garcia Pires, 2012. "Can Governments Reverse First-Mover Advantages of Foreign Competitors?," Economics Bulletin, AccessEcon, vol. 32(2), pages 1527-1536.
    • Handle: RePEc:ebl:ecbull:eb-11-00788
    as

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    File URL: http://www.accessecon.com/Pubs/EB/2012/Volume32/EB-12-V32-I2-P147.pdf
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    References listed on IDEAS

    as
    1. Neary, J. Peter, 1994. "Cost asymmetries in international subsidy games: Should governments help winners or losers?," Journal of International Economics, Elsevier, vol. 37(3-4), pages 197-218, November.
    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.
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    More about this item

    Keywords

    Export Subsidies; First-Mover Advantages; Asymmetric Competitiveness.;
    All these keywords.

    JEL classification:

    • F1 - International Economics - - Trade
    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance

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