Optimal Trade and Industrial Policy Under Oligopoly
We analyze the welfare effects of trade and industrial policy under oligopoly, and characterize optimal intervention under a variety of assumptions about market structure and conduct. When all output is exported, optimal policy with a single home firm depends on the difference between foreign firms' actual responses to the home firm's actions and the responses that the home firm conjectures. A subsidy often is indicated for Cournot behavior, but a tax generally is optimal if firms engage in Bertrand competition. If conjectures are "consistent," free trade is optimal. With domestic consumption, intervention can raise national welfare by reducing the deviation of price from marginal cost.
Volume (Year): 101 (1986)
Issue (Month): 2 ()
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- Dixit, Avinash, 1984. "International Trade Policy for Oligopolistic Industries," Economic Journal, Royal Economic Society, vol. 94(376a), pages 1-16, Supplemen.
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"International R & D Rivalry and Industrial Strategy,"
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- Barbara J. Spencer & James A. Brander, 1983. "International R&D Rivalry and Industrial Strategy," NBER Working Papers 1192, National Bureau of Economic Research, Inc.
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- Barbara J. Spencer & James A. Brander, 1982. "Tariff Protection and Imperfect Competition," Working Papers 517, Queen's University, Department of Economics.
- Morton I. Kamien & Nancy L. Schwartz, 1983. "Conjectural Variations," Canadian Journal of Economics, Canadian Economics Association, vol. 16(2), pages 191-211, May. Full references (including those not matched with items on IDEAS)
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