Strategic Trade Practices in the Presence of a VER

Judith Dean and Shubhashis Gangopadhyay

International Economic Review, 1992, vol. 33, issue 3, 645-59

Abstract: The authors investigate the choice of competing exporters to move simultaneously or sequentially when a voluntary export restraint has introduced both asymmetry and uncertainty amongst them. A restrained and an unrestrained exporter choose price strategically under the threat of a voluntary export restraint on the latter. Given the choice, firms adopt a sequential move strategy, but which "leads" and which "follows" depends upon the threat of the second voluntary export restraint. The restricted firm, thus, sells its full quota, even if this threat is low. Copyright 1992 by Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.

Date: 1992
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