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Delegation and Strategic Trade Policy

  • David Collie

In a trade policy game where the domestic government uses a tariff and the foreign government uses an export subsidy, it is shown that the domestic government should delegate to a policy-maker who attaches less weight to the profits of the domestic firm than the welfare maximizing government. This makes domestic trade policy less aggressive and increases both domestic and foreign welfare. It is even possible that the optimal policy-maker attaches a negative weight to the profits of the domestic firm [F12, F13]

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Article provided by Taylor & Francis Journals in its journal International Economic Journal.

Volume (Year): 11 (1997)
Issue (Month): 3 ()
Pages: 35-46

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Handle: RePEc:taf:intecj:v:11:y:1997:i:3:p:35-46
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  1. Dixit, Avinash, 1984. "International Trade Policy for Oligopolistic Industries," Economic Journal, Royal Economic Society, vol. 94(376a), pages 1-16, Supplemen.
  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.
  3. Gatsios, Konstantine & Karp, Larry, 1995. "Delegation in a general equilibrium model of customs unions," European Economic Review, Elsevier, vol. 39(2), pages 319-333, February.
  4. James A. Brander & Barbara J. Spencer, 1983. "Trade Warfare: Tariffs and Cartels," NBER Working Papers 1193, National Bureau of Economic Research, Inc.
  5. Gatsios, Konstantine & Karp, Larry, 1991. "Delegation Games in Customs Unions," Review of Economic Studies, Wiley Blackwell, vol. 58(2), pages 391-97, April.
  6. Collie, D., 1990. "Export Subsidies And Countervailing Tariffs," The Warwick Economics Research Paper Series (TWERPS) 353, University of Warwick, Department of Economics.
  7. David Collie, 1994. "Endogenous timing in trade policy games: Should governments use countervailing duties?," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 130(1), pages 191-209, March.
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