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Strategic Trade Policy, Spillovers, and the Uncertain Mode of

Author

Listed:
  • Kresimir Zigic

    (CERGE-EI)

Abstract
In this paper we discuss the incentives of a welfare maximizing government to implement strategic trade policy when there is, on the one hand, uncertainty about the relevant market information (like the type of competition, demand function, cost function, etc.), but, on the other hand, the environment of the contest between the firms is specific: there are two firms and the interaction among them is accompanied by technological spillovers from the domestic firm to the foreign firm. The two bench mark oligopoly models -- Bertrand and Cournot -- are assumed to be possible types of market competition. In order to analyse the problem of strategic policy under uncertainty, it is first necessary to work out in depth the optimal tariff policy in perfect information setup for both the Cournot and the Bertrand case. We argue, then, that the "informational" criticism of strategic trade policy is less relevant than was previously thought.

Suggested Citation

  • Kresimir Zigic, 2001. "Strategic Trade Policy, Spillovers, and the Uncertain Mode of," Industrial Organization 0012008, University Library of Munich, Germany.
    • Handle: RePEc:wpa:wuwpio:0012008
    Note: Type of Document - Acrobat PDF; pages: 37 ; figures: included
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    File URL: https://econwpa.ub.uni-muenchen.de/econ-wp/io/papers/0012/0012008.pdf
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    References listed on IDEAS

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    More about this item

    Keywords

    Optimal tariff; Bertrand and Cournot competition; Spillovers; Strategic trade; Government's informational constraints; Social welfare;
    All these keywords.

    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations

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