Free Entry, Quasi-Free Trade, and Strategic Export Policy

This paper analyzes governments’ choices between strategic export subsidies and free trade as a commitment when firms are free to enter or exit in response to these choices. Entry and exit is treated as a discrete process. Within the context of a four‐stage game, two types of equilibria emerge: a qu...

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Bibliographic Details
Published inReview of international economics Vol. 5; no. 1; pp. 83 - 100
Main Author Schulman, Craig T.
Format Journal Article
LanguageEnglish
Published Oxford, UK and Boston, USA Blackwell Publishers Ltd 01.02.1997
Wiley Blackwell
Blackwell
Blackwell Publishing Ltd
SeriesReview of International Economics
Subjects
Economic theory
Equilibrium models
Export policy
Exports
Free trade
Market entry
Studies
Subsidies
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Summary:This paper analyzes governments’ choices between strategic export subsidies and free trade as a commitment when firms are free to enter or exit in response to these choices. Entry and exit is treated as a discrete process. Within the context of a four‐stage game, two types of equilibria emerge: a quasi‐free‐trade equilibrium in which one of the two governments commits to free trade, while the other has a Nash equilibrium subsidy that is zero and bilateral export subsidies. Concerning welfare effects, if fixed costs are large enough, both countries achieve a welfare gain relative to free trade.
Bibliography:ark:/67375/WNG-3B29VG7L-0
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ArticleID:ROIE041
ObjectType-Article-2
SourceType-Scholarly Journals-1
ObjectType-Feature-1
content type line 23
ISSN:0965-7576
1467-9396
DOI:10.1111/1467-9396.00041