Strategic Trade and Industrial Policy Towards Dynamic Oligopolies

Dermot Leahy and J. Peter Neary

No 1968, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We characterize optimal trade and industrial policy in dynamic oligopolistic markets. If governments can commit to future policies, optimal first-period intervention should diverge from the profit-shifting benchmark to an extent which exactly offsets the strategic behaviour implied by Fudenberg and Tirole's 'fat cats and top dogs' taxonomy of business strategies. Without government commitment, there is an additional basis for intervention, whose sign depends on the strategic substitutability between future policy and current actions. We consider a variety of applications (to R&D spillovers, consumer switching costs, etc.) and extensions to second-best, revenue-constrained and entry-promotion policies.

Keywords: Commitment; Dynamic Consistency; Export Subsidies; Learning by Doing; R&D Subsidies; Strategic Trade Policy (search for similar items in EconPapers)
JEL-codes: F12 L13 (search for similar items in EconPapers)
Date: 1998-09
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Citations: View citations in EconPapers (15)

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Related works:
Journal Article: Strategic Trade and Industrial Policy towards Dynamic Oligopolies (2000)
Working Paper: Strategic Trade and Industrial PolicyTowards Dynamic Oligopolies (1998)
Working Paper: Strategic trade and industrial policy towards dynamic oligopolies (1998)
Working Paper: Strategic Trade and Industrial Policy Towards Dynamic Oligopolies (1998)
Working Paper: Strategic trade and industrial policy towards dynamic oligopolies (1998)
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