Abstract
This paper examines strategic trade and joint welfare maximizing incentives towards investment in the quality of exports by an LDC and a developed country. Firms first compete in qualities and then export to an imperfectly competitive, third country market. Under Bertrand competition, unilateral policy involves an investment subsidy by the low-quality LDC and an investment tax by the developed country, whereas jointly optimal policy calls for the reverse so as to reduce price competition by increasing product differentiation. Under Cournot competition, unilateral policy is also reversed from the Bertrand outcome, but jointly optimal policy involves a tax in both countries. © 2002 Elsevier Science B.V. All rights reserved.
| Original language | English |
|---|---|
| Pages (from-to) | 205-232 |
| Journal | Journal of International Economics |
| Volume | 56 |
| Issue number | 1 |
| DOIs | |
| Publication status | Published - 2002 |
| Externally published | Yes |
Bibliographical note
Publication details (e.g. title, author(s), publication statuses and dates) are captured on an “AS IS” and “AS AVAILABLE” basis at the time of record harvesting from the data source. Suggestions for further amendments or supplementary information can be sent to [email protected].Funding
We would like to thank Zhiqi Chen and Brian Copeland for very helpful comments. An early version of this paper formed part of the UBC, Ph.D. thesis, Zhou (1997), supervised by Ilan Vertinsky, Barbara J. Spencer and Shelby Brumelle. We are grateful for financial support from the SSHRC and NSERC.
Research Keywords
- Investment in quality
- R and D subsidies
- Strategic trade policy
- Vertical product differentiation
Policy Impact
- Cited in Policy Documents
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