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Export subsidies and international market share rivalry

  • Brander, James A.
  • Spencer, Barbara J.

Countries often perceive themselves as being in competition with each other for profitable international markets. In such a world export subsidies can appear as attractive policy tools, from a national point of view, because they improve the relative position of a domestic firm in noncooperative rivalries with foreign firms, enabling it to expand its market share and earn greater profits. In effect, subsidies change the initial conditions of the game that firms play. The terms of trade move against the subsidizing country, but its welfare can increase because, under imperfect competition, price exceeds the marginal cost of exports. International noncooperative equilibriumis characterized by such subsidies on the part of exporting nations, even though they are jointly suboptimal.

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Article provided by Elsevier in its journal Journal of International Economics.

Volume (Year): 18 (1985)
Issue (Month): 1-2 (February)
Pages: 83-100

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Handle: RePEc:eee:inecon:v:18:y:1985:i:1-2:p:83-100
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/505552

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  1. J. de V. Graaff, 1949. "On Optimum Tariff Structures," Review of Economic Studies, Oxford University Press, vol. 17(1), pages 47-59.
  2. James A. Brander & Barbara J. Spencer, 1981. "Tariffs and the Extraction of Foreign Monopoly Rents under Potential Entry," Canadian Journal of Economics, Canadian Economics Association, vol. 14(3), pages 371-89, August.
  3. Frenkel, Jacob A, 1971. "On Domestic Demand and Ability to Export," Journal of Political Economy, University of Chicago Press, vol. 79(3), pages 668-72, May-June.
  4. Barbara J. Spencer & James A. Brander, 1982. "International R&D Rivalry and Industrial Strategy," Working Papers 518, Queen's University, Department of Economics.
  5. Dixit, Avinash, 1979. "The Role of Investment in Entry-Deterrence," The Warwick Economics Research Paper Series (TWERPS) 140, University of Warwick, Department of Economics.
  6. Jonathan Eaton & Gene M. Grossman, 1986. "Optimal Trade and Industrial Policy Under Oligopoly," The Quarterly Journal of Economics, Oxford University Press, vol. 101(2), pages 383-406.
  7. A. Michael Spence, 1977. "Entry, Capacity, Investment and Oligopolistic Pricing," Bell Journal of Economics, The RAND Corporation, vol. 8(2), pages 534-544, Autumn.
  8. Dixit, Avinash K. & Grossman, Gene M., 1986. "Targeted export promotion with several oligopolistic industries," Journal of International Economics, Elsevier, vol. 21(3-4), pages 233-249, November.
  9. Brander, James A. & Spencer, Barbara J., 1984. "Trade warfare: Tariffs and cartels," Journal of International Economics, Elsevier, vol. 16(3-4), pages 227-242, May.
  10. Rieber, William J, 1982. "Discriminating Monopoly and International Trade," Economic Journal, Royal Economic Society, vol. 92(366), pages 365-76, June.
  11. Pursell, G. & Snape, R. H., 1973. "Economies of scale, price discrimination and exporting," Journal of International Economics, Elsevier, vol. 3(1), pages 85-91, February.
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