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Strategic trade policy and signaling costs with differentiated goods
Author(s) -
Ferreira Fernanda A.,
Moreira Humberto A.,
Pinto Alberto A.
Publication year - 2007
Publication title -
pamm
Language(s) - English
Resource type - Journals
ISSN - 1617-7061
DOI - 10.1002/pamm.200700363
Subject(s) - subsidy , private information retrieval , economics , microeconomics , welfare , nash equilibrium , government (linguistics) , bayesian game , monetary economics , game theory , market economy , repeated game , linguistics , statistics , philosophy , mathematics
We consider a trade policy model, where the costs of the home firm are private information but can be signaled through the output levels of the firm to a foreign competitor and a home policymaker. We compute the separating equilibrium and the Bayesian Nash equilibrium, and we compare the subsidies, firms' expected profits and home government's welfare in both equilibria, for different values of the own price effect parameter. (© 2008 WILEY‐VCH Verlag GmbH & Co. KGaA, Weinheim)