Premium
STRATEGIC EXPORT POLICY IN VERTICALLY RELATED MARKETS
Author(s) -
Kawabata Yasushi
Publication year - 2010
Publication title -
bulletin of economic research
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.227
H-Index - 29
eISSN - 1467-8586
pISSN - 0307-3378
DOI - 10.1111/j.1467-8586.2009.00310.x
Subject(s) - duopoly , product differentiation , subsidy , intermediate good , economics , product (mathematics) , welfare , final good , intervention (counseling) , international economics , bertrand competition , industrial organization , microeconomics , international trade , production (economics) , market economy , oligopoly , psychology , geometry , mathematics , psychiatry
This paper analyses how strategic export policies are affected by introducing an imperfectly competitive intermediate good into a Bertrand duopoly model with product differentiation, where a home and a foreign final‐good firm export to a third‐country market. It is shown that when the home and foreign markets for the intermediate good are segmented, the optimal export policy towards the final good is a tax. In contrast, under integrated markets, the optimal export intervention is a subsidy. Whether bilateral export intervention is welfare improving compared with free trade, depends on the degree of product differentiation between the home and foreign final goods.