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Strategic Trade Policy in a Vertically Related Industry
Author(s) -
Bernhofen Daniel M.
Publication year - 1997
Publication title -
review of international economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.513
H-Index - 58
eISSN - 1467-9396
pISSN - 0965-7576
DOI - 10.1111/1467-9396.00067
Subject(s) - subsidy , economics , intermediate good , economic interventionism , vertical integration , final good , intervention (counseling) , government (linguistics) , microeconomics , industrial organization , international economics , market economy , production (economics) , psychology , linguistics , philosophy , psychiatry , politics , political science , law
This paper investigates strategic export intervention in a final‐good industry which uses an intermediate good supplied by a foreign monopolist. An export tax‐cum‐subsidy leads to horizontal and vertical rent extraction. The optimal government intervention in the final‐good market is shown to depend on the pricing scheme employed by the intermediate‐good producer.