Endogenous Market Structures and Strategic Trade Policy
Author | : Federico Etro |
Publisher | : |
Total Pages | : 0 |
Release | : 2011 |
ISBN-10 | : OCLC:1376472795 |
ISBN-13 | : |
Rating | : 4/5 (95 Downloads) |
Book excerpt: I characterize the optimal export promoting policy for international markets whose structure is endogenous. Contrary to the ambiguous results of strategic trade policy for duopolies, it is always optimal to subsidize exports when entry is endogenous, under both quantity and price competition. With homogenous goods the optimal export subsidy is a fraction of the price, where is the elasticity of demand (the exact opposite of the optimal export tax in the neoclassical trade theory). Analogously, I show the general optimality of R&D subsidies and of competitive devaluations to promote exports in foreign markets where entry is endogenous.