Vertical Foreclosure and International Trade Policy

Barbara Spencer and Ronald Jones

The Review of Economic Studies, 1991, vol. 58, issue 1, 153-170

Abstract: International differences in the cost of production of a key intermediate product can mean that a domestic firm is dependent on supplies from a foreign vertically integrated firm. This paper considers the incentives for the foreign firm and foreign country to supply the domestic firm when the firms compete in a Cournot or Bertrand market for the final product. The vertical supply decision is significantly affected by domestic supply conditions for the input and a domestic tariff on final product imports. Optimal policy by the exporting country may require a tax on both exports, or a subsidy on both exports.

Date: 1991
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Related works:
Working Paper: Vertical Foreclosure and International Trade Policy (1989)
Working Paper: VERTICAL FORECLOSURE AND INTERNATIONAL TRADE POLICY (1989)
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Persistent link: https://EconPapers.repec.org/RePEc:oup:restud:v:58:y:1991:i:1:p:153-170.

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