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International Trade Policy towards Monopolies and Oligopolies

Author

Listed:
  • Praveen Kujal

    (Universidad Carlos III de Madrid)

  • Juan Ruiz

    (Universidad Carlos III de Madrid)

Abstract

We study the effect of market structure upon international trade policy when firms invest in process R&D before competing in a differentiated goods market. For a domestic monopoly, and increasing the number of foreign firms, the government either chooses a R&D (and output) subsidy, or remains inactive. For a domestic duopoly a government taxes, subsidizes, or does not promote R&D depending upon the number of domestic firms and the degree of product differentiation. R&D (and output) is taxed for high levels of product differentiation. For lower levels of product differentiation only one country may subsidize in equilibrium. Further, the results are robust to Cournot or Bertrand competition.

Suggested Citation

  • Praveen Kujal & Juan Ruiz, 2003. "International Trade Policy towards Monopolies and Oligopolies," International Trade 0302002, University Library of Munich, Germany, revised 24 Mar 2003.
  • Handle: RePEc:wpa:wuwpit:0302002
    Note: Type of Document - pdf file; prepared on Scientific Workplace; to print on any printer; pages: 20 ; figures: included in text
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    References listed on IDEAS

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    2. Leahy, Dermot & Neary, J Peter, 1997. "Public Policy towards R&D in Oligopolistic Industries," American Economic Review, American Economic Association, vol. 87(4), pages 642-662, September.
    3. Bester, Helmut & Petrakis, Emmanuel, 1993. "The incentives for cost reduction in a differentiated industry," International Journal of Industrial Organization, Elsevier, vol. 11(4), pages 519-534.
    4. repec:adr:anecst:y:1998:i:49-50 is not listed on IDEAS
    5. Dixit, Avinash, 1984. "International Trade Policy for Oligopolistic Industries," Economic Journal, Royal Economic Society, vol. 94(376a), pages 1-16, Supplemen.
    6. Avinash Dixit, 1979. "A Model of Duopoly Suggesting a Theory of Entry Barriers," Bell Journal of Economics, The RAND Corporation, vol. 10(1), pages 20-32, Spring.
    7. 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.
    8. Krishna, Kala & Thursby, Marie, 1991. "Optimal policies with strategic distortions," Journal of International Economics, Elsevier, vol. 31(3-4), pages 291-308, November.
    9. Barbara J. Spencer & James A. Brander, 1983. "International R & D Rivalry and Industrial Strategy," Review of Economic Studies, Oxford University Press, vol. 50(4), pages 707-722.
    10. 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.
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    13. Barbara J. Spencer & James A. Brander, 1982. "Tariff Protection and Imperfect Competition," Working Papers 517, Queen's University, Department of Economics.
    14. Celia Costa Cabral & Praveen Kujal & Emmanuel Petrakis, 1998. "Incentives for Cost Reducing Innovations under Quantitative Import Restraints," Annals of Economics and Statistics, GENES, issue 49-50, pages 479-493.
    15. Maggi, Giovanni, 1996. "Strategic Trade Policies with Endogenous Mode of Competition," American Economic Review, American Economic Association, vol. 86(1), pages 237-258, March.
    16. Barbara J. Spencer & James A. Brander, 1983. "International R & D Rivalry and Industrial Strategy," Boston College Working Papers in Economics 118, Boston College Department of Economics.
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    Cited by:

    1. Praveen Kujal & Juan M. Ruiz, 2009. "International Trade Policy towards Monopoly and Oligopoly," Review of International Economics, Wiley Blackwell, vol. 17(3), pages 461-475, August.

    More about this item

    Keywords

    Product Differentiation; Strategic Trade Policy; Policy Reversals; R&D subsidies; monopoly; duopoly.;

    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

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