Time-Consistent Solutions to the Stochastic Dynamic Strategic Export Subsidy Problem

Konstantine Gatsios and Tryphon Kollintzas ()

No 1405, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: In this paper we obtain the time-consistent solution to a stochastic dynamic version of the strategic export subsidy problem. The dynamic structure of the problem emanates either from an exhaustible resource or from a learning-by-doing technology. In any given period, nature ‘chooses’ the stochastic demand and cost parameters first. Then, governments choose subsidies. Lastly, firms choose output levels. We establish existence, uniqueness, and representation results for the time-consistent equilibrium of the game. Various interesting features of the solution are illustrated by simulation analysis. In particular, subsidies jump immediately to positive levels and, perhaps paradoxically, are reduced gradually to zero in the exhaustible resource case, while they keep rising in the learning-by-doing case. Subsidies are higher in the learning-by-doing case than when the good in question is an exhaustible resource. Also, they are higher in the case when only one government is active, and lower in the corresponding time-inconsistent equilibrium case.

Keywords: Exhaustible Resource; Learning-by-doing; Strategic Export Subsidy; Time-consistent Equilibrium (search for similar items in EconPapers)
JEL-codes: C16 C73 F13 (search for similar items in EconPapers)
Date: 1996-05
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www.cepr.org/active/publications/discussion_papers/dp.php?dpno=1405 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cpr:ceprdp:1405

Ordering information: This working paper can be ordered from
http://www.cepr.org/ ... ers/dp.php?dpno=1405

Access Statistics for this paper

More papers in CEPR Discussion Papers from Centre for Economic Policy Research 33 Great Sutton Street, London EC1V 0DX, UK.
Bibliographic data for series maintained by CEPR ().