IDEAS home Printed from https://ideas.repec.org/a/kap/expeco/v7y2007i1p31-52.html
   My bibliography  Save this article

Industry Concentration and Strategic Trade Policy in Successive Oligopoly

Author

Listed:
  • Gjermund Nese
  • Odd Straume

Abstract

We study a policy game between exporting and importing countries in vertically linked industries. In a successive international Cournot oligopoly, we analyse incentives for using tax instruments strategically to shift rents vertically, between exporting and importing countries, and horizontally, between exporting countries. We show that the equilibrium outcome depends crucially on the relative degree of competitiveness in the upstream and downstream parts of the industry. With respect to national welfare, a more competitive upstream industry may benefit an exporting (upstream) country and harm an importing (downstream) country. On the other hand, a more competitive downstream industry may harm exporting countries. Copyright Springer Science+Business Media, LLC 2007

Suggested Citation

  • Gjermund Nese & Odd Straume, 2007. "Industry Concentration and Strategic Trade Policy in Successive Oligopoly," Experimental Economics, Springer;Economic Science Association, vol. 7(1), pages 31-52, March.
    • Handle: RePEc:kap:expeco:v:7:y:2007:i:1:p:31-52
    DOI: 10.1007/s10842-006-0001-7
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1007/s10842-006-0001-7
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1007/s10842-006-0001-7?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Steffen Ziss, 2005. "Horizontal Mergers and Successive Oligopoly," Journal of Industry, Competition and Trade, Springer, vol. 5(2), pages 99-114, June.
    2. Martin Richardson, 2017. "Trade and Competition Policies: Concordia Discors?," World Scientific Book Chapters, in: Dimensions of Trade Policy, chapter 11, pages 221-242, World Scientific Publishing Co. Pte. Ltd..
    3. Radetzki, Marian, 1999. "European natural gas: market forces will bring about competition in any case," Energy Policy, Elsevier, vol. 27(1), pages 17-24, January.
    4. 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.
    5. Horn, Henrik & Levinsohn, James, 2001. "Merger Policies and Trade Liberalisation," Economic Journal, Royal Economic Society, vol. 111(470), pages 244-276, April.
    6. Katrak, Homi, 1977. "Multi-national Monopolies and Commercial Policy," Oxford Economic Papers, Oxford University Press, vol. 29(2), pages 283-291, July.
    7. 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 371-389, August.
    8. Spencer, Barbara J. & Jones, Ronald W., 1992. "Trade and protection in vertically related markets," Journal of International Economics, Elsevier, vol. 32(1-2), pages 31-55, February.
    9. Jonathan Eaton & Gene M. Grossman, 1986. "Optimal Trade and Industrial Policy Under Oligopoly," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 101(2), pages 383-406.
    10. James Brander & Slobodan Djajic, 1983. "Rent-Extracting Tariffs and the Management of Exhaustible Resources," Canadian Journal of Economics, Canadian Economics Association, vol. 16(2), pages 288-298, May.
    11. Hillman, Arye L & Templeman, Joseph, 1985. "On the Use of Trade Policy Measures by a Small Country to Counter Foreign Monopoly Power," Oxford Economic Papers, Oxford University Press, vol. 37(2), pages 346-352, June.
    12. Rolf Golombek & Eystein Gjelsvik & Knut Einar Rosendahl, 1998. "Increased Competition on the Supply Side of the Western European Natural Gas Market," The Energy Journal, International Association for Energy Economics, vol. 0(Number 3), pages 1-18.
    13. Hisashi Hokari & Hong Hwang & Hiroshi Ohta, 2003. "Import tariff upstream versus export tax downstream: are they welfare equivalent?," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 12(3), pages 247-256.
    14. Ishikawa, Jota & Spencer, Barbara J., 1999. "Rent-shifting export subsidies with an imported intermediate product," Journal of International Economics, Elsevier, vol. 48(2), pages 199-232, August.
    15. Steffen Huck & Kai A. Konrad, 2004. "Merger Profitability and Trade Policy," Scandinavian Journal of Economics, Wiley Blackwell, vol. 106(1), pages 107-122, March.
    16. Pascalis Raimondos-Møller & Alan D. Woodland, 2000. "Tariff strategies and small open economies," Canadian Journal of Economics, Canadian Economics Association, vol. 33(1), pages 25-40, February.
    17. Barbara J. Spencer & Ronald W. Jones, 1991. "Vertical Foreclosure and International Trade Policy," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 58(1), pages 153-170.
    18. Michael A. Salinger, 1988. "Vertical Mergers and Market Foreclosure," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 103(2), pages 345-356.
    19. Ziss, Steffen, 1997. "Strategic Trade Policy and Vertical Structure," Review of International Economics, Wiley Blackwell, vol. 5(1), pages 142-152, February.
    20. Sajal Lahiri & Yoshiyasu Ono, 1999. "Optimal Tariffs in the Presence of Middlemen," Canadian Journal of Economics, Canadian Economics Association, vol. 32(1), pages 55-70, February.
    21. Auquier, A A & Caves, R E, 1979. "Monopolistic Export Industries, Trade Taxes, and Optimal Competition Policy," Economic Journal, Royal Economic Society, vol. 89(355), pages 559-581, September.
    22. Dixit, Avinash, 1984. "International Trade Policy for Oligopolistic Industries," Economic Journal, Royal Economic Society, vol. 94(376a), pages 1-16, Supplemen.
    23. Bergstrom, Theodore C, 1982. "On Capturing Oil Rents with a National Excise Tax," American Economic Review, American Economic Association, vol. 72(1), pages 194-201, March.
    24. 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.
    25. Simon Cowan, 1989. "Trade and Competition Policies for Oligopolies," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 125(3), pages 464-483, September.
    26. Maroeska G. Boots, Fieke A.M. Rijkers and Benjamin F. Hobbs, 2004. "Trading in the Downstream European Gas Market: A Successive Oligopoly Approach," The Energy Journal, International Association for Energy Economics, vol. 0(Number 3), pages 73-102.
    27. Austvik, Ole Gunnar, 1997. "Gas pricing in a liberalized European market; will the rent be taxed away?," Energy Policy, Elsevier, vol. 25(12), pages 997-1012, October.
    28. Bernhofen, Daniel M, 1997. "Strategic Trade Policy in a Vertically Related Industry," Review of International Economics, Wiley Blackwell, vol. 5(3), pages 429-433, August.
    29. Conrad Klaus, 1993. "Taxes and Subsidies for Pollution-Intensive Industries as Trade Policy," Journal of Environmental Economics and Management, Elsevier, vol. 25(2), pages 121-135, September.
    30. Percebois, Jacques, 1999. "The gas deregulation process in Europe: economic and political approach," Energy Policy, Elsevier, vol. 27(1), pages 9-15, January.
    31. Ishikawa, Jota & Lee, Ki-Dong, 1997. "Backfiring tariffs in vertically related markets," Journal of International Economics, Elsevier, vol. 42(3-4), pages 395-423, May.
    Full references (including those not matched with items on IDEAS)

    Citations

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


    Cited by:

    1. Lommerud, Kjell Erik & Olsen, Trond E. & Straume, Odd Rune, 2005. "Access regulation and cross-border mergers: Is international coordination beneficial?," Working Papers in Economics 13/05, University of Bergen, Department of Economics.
    2. Reza Oladi & John Gilbert, 2012. "Buyer and Seller Concentration in Global Commodity Markets," Review of Development Economics, Wiley Blackwell, vol. 16(2), pages 359-367, May.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Gjermund Nese & Odd Straume, 2007. "Industry Concentration and Strategic Trade Policy in Successive Oligopoly," Journal of Industry, Competition and Trade, Springer, vol. 7(1), pages 31-52, March.
    2. Ishikawa, Jota & Spencer, Barbara J., 1999. "Rent-shifting export subsidies with an imported intermediate product," Journal of International Economics, Elsevier, vol. 48(2), pages 199-232, August.
    3. Brander, James A., 1995. "Strategic trade policy," Handbook of International Economics, in: G. M. Grossman & K. Rogoff (ed.), Handbook of International Economics, edition 1, volume 3, chapter 27, pages 1395-1455, Elsevier.
    4. Luciano Fanti & Domenico Buccella, 2023. "Vertical industry and strategic trade policy," SN Business & Economics, Springer, vol. 3(2), pages 1-16, February.
    5. Choi, Kangsik & Lim, Seonyoung, 2014. "Strategic Trade Policies with Endogenous Choice of Competition Mode under a Vertical Structure," MPRA Paper 59074, University Library of Munich, Germany.
    6. Wang, Kuang-Cheng A. & Koo, Hui-Wen & Chen, Tain-Jy, 2011. "Domestic trade protection in vertically-related markets," Economic Modelling, Elsevier, vol. 28(4), pages 1595-1603, July.
    7. Keith Head & Barbara J. Spencer, 2017. "Oligopoly in international trade: Rise, fall and resurgence," Canadian Journal of Economics, Canadian Economics Association, vol. 50(5), pages 1414-1444, December.
    8. Stiegert, Kyle W. & Wang, Shinn-Shyr, 2003. "Imperfect Competition And Strategic Trade Theory: What Have We Learned," Working Papers 14589, International Agricultural Trade Research Consortium.
    9. Reimer, Jeffrey J. & Stiegert, Kyle W., 2006. "Evidence on Imperfect Competition and Strategic Trade Theory," Staff Paper Series 498, University of Wisconsin, Agricultural and Applied Economics.
    10. Tai‐Liang Chen & Ying Kuang, 2023. "Endogenous timing, strategic tariff game and bilateral trade in vertical oligopoly," Pacific Economic Review, Wiley Blackwell, vol. 28(1), pages 74-96, February.
    11. Yasushi Kawabata, 2010. "Strategic Export Policy In Vertically Related Markets," Bulletin of Economic Research, Wiley Blackwell, vol. 62(2), pages 109-131, April.
    12. Alain-Désiré Nimubona, 2010. "Pollution Policy and Liberalization of Trade in Environmental Goods," Working Papers 1004, University of Waterloo, Department of Economics, revised May 2010.
    13. Alain-Désiré Nimubona, 2012. "Pollution Policy and Trade Liberalization of Environmental Goods," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 53(3), pages 323-346, November.
    14. Ki‐Dong Lee & Kangsik Choi & DongJoon Lee, 2020. "Endogenous vertical structure and trade policy in an import‐competing market," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 41(8), pages 1431-1445, December.
    15. repec:ebl:ecbull:v:6:y:2008:i:8:p:1-7 is not listed on IDEAS
    16. Hamilton, Stephen F. & Requate, Till, 2004. "Vertical structure and strategic environmental trade policy," Journal of Environmental Economics and Management, Elsevier, vol. 47(2), pages 260-269, March.
    17. Siebert, Horst, 1988. "Strategische Handelspolitik: Theoretische Ansätze und wirtschaftspolitische Empfehlungen," Discussion Papers, Series II 43, University of Konstanz, Collaborative Research Centre (SFB) 178 "Internationalization of the Economy".
    18. Steffen Huck & Kai A. Konrad, 2003. "Strategic Trade Policy and Merger Profitability," CESifo Working Paper Series 948, CESifo.
    19. Martino De Stefano & Marc Rysman, 2010. "Competition Policy as Strategic Trade with Differentiated Products," Review of International Economics, Wiley Blackwell, vol. 18(4), pages 758-771, September.
    20. Laixun Zhao, 2000. "Decentralization and Transfer Pricing Under Oligopoly," Southern Economic Journal, John Wiley & Sons, vol. 67(2), pages 414-426, October.
    21. Aditya Bhattacharjea & Kanika Pathania & Uday Bhanu Sinha, 2022. "Duty Inversion and Effective Protection: A Theoretical Analysis," Working papers 330, Centre for Development Economics, Delhi School of Economics.

    More about this item

    Keywords

    successive oligopoly; strategic trade policy; industry concentration; F12; F13; L13;
    All these keywords.

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

    Statistics

    Access and download statistics

    Corrections

    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:kap:expeco:v:7:y:2007:i:1:p:31-52. See general information about how to correct material in RePEc.

    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.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with 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.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

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

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.