Optimal export policy with upstream price competition

Tomomichi Mizuno and Kazuhiro Takauchi

No 1805, Discussion Papers from Graduate School of Economics, Kobe University

Abstract: We constructed a third-market model with a vertical trading structure in which input suppliers engage in the homogeneous price competition `a la Dastidar (1995). We show that in the case of downstream Bertrand competition, a non-monotonic export policy may appear, that is, the optimal export policy can change like a tax-subsidy-tax as the degree of product-substitutability rises. We also show that when the number of domestic input suppliers is at an intermediate level, the conventional result in which the optimal policy is an export subsidy (tax) if downstream is Cournot (Bertrand) rivalry remains. We further discuss welfare comparisons between downstream Cournot and Bertrand cases.

Keywords: Upstream price competition; Export subsidy/tax; Non-monotonic policy; Product substitutability (search for similar items in EconPapers)
JEL-codes: D43 F12 F13 L13 (search for similar items in EconPapers)
Pages: 32 pages
Date: 2018-02
New Economics Papers: this item is included in nep-com, nep-ind and nep-int
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Citations: View citations in EconPapers (2)

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Journal Article: Optimal Export Policy With Upstream Price Competition (2020)
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