Uncertainty Resolution and Strategic Trade Policy in Oligopolistic Industries

Posted: 31 Aug 1998

Abstract

This paper investigates a government's choice of strategic trade policy when the domestic firm observes a private noisy signal about the stochastic market demand while in competition with a rival firm. The government chooses between quantity controls and subsidies to maximize profits of the domestic firm. Assuming that firms compete a la Cournot in a third country, we show that the optimal trade policy depends not only on demand uncertainty but also on the predictability of the true market demand by the firms.

JEL Classification: F12

Suggested Citation

Caglayan, Mustafa O., Uncertainty Resolution and Strategic Trade Policy in Oligopolistic Industries. Available at SSRN: https://ssrn.com/abstract=117208

Mustafa O. Caglayan (Contact Author)

University of Sheffield ( email )

17 Mappin Street
Sheffield, Sheffield S1 4DT
United Kingdom

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