Strategic Trade Policy in the Presence of Consumer Learning

Charlotte Wojcik

Economica, 2000, vol. 67, issue 266, 283-295

Abstract: This paper explores the potential role for strategic trade policy when demand is impacted by consumer learning. In a linear Cournot model, the optimal subsidy is shown to be increasing in both the firm‐specific learning and learning spillovers among home firms when firms can precommit; however, when precommitment by firms and/or the government is not possible, strategic behaviour by firms may more than offset the infant industries' incentive for an export subsidy. A calibration exercise illustrates the impact of consumer learning on the optimal subsidies and also demonstrates the sensitivity of the policy prescription.

Date: 2000
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Persistent link: https://EconPapers.repec.org/RePEc:bla:econom:v:67:y:2000:i:266:p:283-295

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