RT Generic
T1 Trade policies, time consistency, quality reversals and exit in vertically integrated industries
A1 Herguera, Iñigo
A1 Kujal, Praveen
A1 Petrakis, Emmanuel
A2 Universidad Carlos III de Madrid. Departamento de Economía, 
AB The impact of strategic trade policies, such as import tariffs and domestic output subsidies, is studied in a vertically differentiated duopoly. Firms first choose quality and then compete in quantities or prices in the home market. If the government is unable to commit to a policy the domestic firm then chooses its quality strategically in order to alter the market structure in its favor. Time consistent subsidies are always positive and result in a domestic monopoly as the foreign firm exits the market. Time consistent tariffs are also positive and ensure that the domestic firm always produces the high quality good. Commitment to a subsidy results in greater domestic welfare than under non-commital. Except for the case when, under price competition and the domestic firm producing the low quality good under free trade, non-commital under tariffs by the domestic government is welfare improving.
SN 2340-5031
YR 2000
FD 2000-05
LK https://hdl.handle.net/10016/7223
UL https://hdl.handle.net/10016/7223
LA eng
DS e-Archivo
RD 9 may. 2024