DELEGATION AND STRATEGIC TRADE POLICY*

David Collie

International Economic Journal, 1997, vol. 11, issue 3, pages 35-46

Abstract: 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 maximising 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]

Date: 1997
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