Strategic Trade Policy and Mode of Competition: Symmetric versus Asymmetric Information

Delia Ionascu and Kresimir Zigic ()
Additional contact information
Delia Ionascu: CERGE-EI

International Trade from University Library of Munich, Germany

Abstract: In this paper, we analyze the following policy dilemma: strategic trade policy versus free trade when the domestic government is bound to intervene only after the domestic firm's strategic variable is chosen. This intervention allows the domestic firm to manipulate the domestic government and results in a socially inefficient choice of the strategic variable. However, commitment to free trade leads to forgoing the benefits from profit-shifting. Yet, from the social point of view, free trade may be optimal even under the assumption of symmetric information. Due to costly signaling, this result is reinforced in the case of asymmetric information.

Keywords: strategic trade policy; free trade; first-best versus second best policy; government's commitment; signaling (search for similar items in EconPapers)
JEL-codes: F13 (search for similar items in EconPapers)
Pages: 39 pages
Date: 2001-06-13
Note: Type of Document - Acrobat PDF; pages: 39 ; figures: included
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://econwpa.ub.uni-muenchen.de/econ-wp/it/papers/0106/0106001.pdf (application/pdf)

Related works:
Working Paper: Strategic Trade Policy and Mode of Competition: Symmetric versus Asymmetric Information (2001)
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:wpa:wuwpit:0106001

Access Statistics for this paper

More papers in International Trade from University Library of Munich, Germany
Bibliographic data for series maintained by EconWPA ( this e-mail address is bad, please contact ).