Strategic Trade Policy, Spillovers, and the Uncertain Mode of

Kresimir Zigic

Industrial Organization from EconWPA

Abstract: In this paper we discuss the incentives of a welfare maximizing government to implement strategic trade policy when there is, on the one hand, uncertainty about the relevant market information (like the type of competition, demand function, cost function, etc.), but, on the other hand, the environment of the contest between the firms is specific: there are two firms and the interaction among them is accompanied by technological spillovers from the domestic firm to the foreign firm. The two bench mark oligopoly models -- Bertrand and Cournot -- are assumed to be possible types of market competition. In order to analyse the problem of strategic policy under uncertainty, it is first necessary to work out in depth the optimal tariff policy in perfect information setup for both the Cournot and the Bertrand case. We argue, then, that the "informational" criticism of strategic trade policy is less relevant than was previously thought.

Keywords: Optimal tariff; Bertrand and Cournot competition; Spillovers; Strategic trade; Government's informational constraints; Social welfare (search for similar items in EconPapers)
JEL-codes: L13 F13 (search for similar items in EconPapers)
Date: 2001-02-26
Note: Type of Document - Acrobat PDF; pages: 37 ; figures: included
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Persistent link: http://EconPapers.repec.org/RePEc:wpa:wuwpio:0012008

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