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Unionized Bertrand Duopoly and Strategic Export Policy
Author(s) -
Bandyopadhyay Subhayu,
Bandyopadhyay Sudeshna C.,
Park And EunSoo
Publication year - 2000
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 - 10.1111/1467-9396.00213
Subject(s) - cournot competition , economics , bertrand competition , subsidy , duopoly , microeconomics , robustness (evolution) , stackelberg competition , strategic complements , competition (biology) , oligopoly , market economy , ecology , biochemistry , chemistry , biology , gene
The paper reports that an export subsidy is optimal for a unionized Bertrand duopoly. Following results published by Brander and Spencer ( Journal of International Economics , 1988, pp. 217–34), this establishes the robustness of export subsidization to the mode of competition (Cournot or Bertrand), and contrasts with nonunion results in the literature. If both firms are unionized and both governments pursue active trade policies, a subsidy remains optimal except for a narrow range of extreme substitutability between products. Nations with a lower opportunity cost of labor employ more aggressive policies in equilibrium.