Premium
Market Structure and the Demand for Free Trade
Author(s) -
Balboa Orlando I.,
Daughety Andrew F.,
Reinganum Jennifer F.
Publication year - 2004
Publication title -
journal of economics and management strategy
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.672
H-Index - 68
eISSN - 1530-9134
pISSN - 1058-6407
DOI - 10.1111/j.1430-9134.2004.00006.x
Subject(s) - duopoly , subsidy , interdependence , economics , market structure , microeconomics , commercial policy , government (linguistics) , industrial organization , cournot competition , international economics , market economy , linguistics , philosophy , political science , law
We examine a heterogenous goods duopoly model, wherein governments simultaneously and noncooperatively choose whether or not to provide subsidies for their firms and then firms noncooperatively choose output levels, either sequentially or simultaneously. We find that government trade policy and market structure are interdependent. First, the trade regime alters traditional firm preferences over sequential versus simultaneous play. Second, different market structures influence governments' preferences about free trade versus subsidies. Further, if one of the firms is a potential leader, allowing for endogenous market structure generates equilibrium outcomes that sometimes reinforce, and sometimes counter, traditional results in the strategic trade literature .