Can We Believe in Cold Showers?
This paper considers the case of a firm which faces the decision as to whether in invest in a cost-reducing technology with an uncertain return. Under certain conditions the removal of protection can facilitate this investment (a 'cold shower'). It is shown, in the case of Cournot competition, that a cold shower is more likely if a quota rather than a tariff is the protective instrument. It is also leader rather than a Cournot competitor. A Cournot market structure is used to consider a reduction in the number of foreign firms (an increase in the domestic frims market power). It is argured that it is reasonable to belive that this will increase the likelihood of a cold shower occurring.
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