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Strategic Trade Policy Under Uncertainty *
Author(s) -
Qiu Larry D.
Publication year - 1995
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/j.1467-9396.1995.tb00053.x
Subject(s) - economics , nonlinear system , commercial policy , microeconomics , international economics , quantum mechanics , physics
This paper extends the Brander‐Spencer (1985) model by considering market uncertainty, exploring nonlinear policy, and examining firms' choices of strategic variables. By investigating the interrelationship between trade policy and market conduct, we find that unlike the often‐studied linear policy, a nonlinear policy can influence the domestic firm's choice of strategic variables and hence alter the market conduct in favor of the domestic country. Therefore, a nonlinear policy proves strictly superior to a linear one.