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Optimum Trade Policy Towards Imperfectly Competitive Industries: Two Norwegian Examples

Author

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  • Daltung, Sonja
  • Eskeland, Gunnar
  • Norman, Victor D

Abstract

The paper studies the effects of trade and industrial policy towards two imperfectly competitive Norwegian industries - ski production and Caribbean cruise shipping. The former is an import-competing industry in which consumer prices and product selection are the key issues; the latter is a pure export industry in which the maximization of Norwegian profits is the relevant objective. The paper sets up numerical models of the two industries and uses these to simulate the effects of policy intervention. In the ski market, it is shown that production subsidies to domestic firms will give a welfare gain, but the optimum subsidy is highly sensitive to cost and entry conditions; asymmetric information may produce perverse cost incentives. In the cruise industry, the policy question is whether or not to permit Norwegian ships to use less expensive foreign crews. It is shown that the answer depends critically on the nature of foreign competition.

Suggested Citation

  • Daltung, Sonja & Eskeland, Gunnar & Norman, Victor D, 1987. "Optimum Trade Policy Towards Imperfectly Competitive Industries: Two Norwegian Examples," CEPR Discussion Papers 218, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:218
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    Citations

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    Cited by:

    1. J. David Richardson, 1989. "Empirical Research on Trade Liberalization With Imperfect Competition: A Survey," NBER Working Papers 2883, National Bureau of Economic Research, Inc.
    2. Richard Baldwin & Harry Flam, 1989. "Strategic trade policies in the market for 30–40 seat commuter aircraft," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 125(3), pages 484-500, September.

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