Export Subsidies, Cost Differential and Product Quality

10 Pages Posted: 2 Feb 2010

See all articles by Hong Hwang

Hong Hwang

National Taiwan University

Chao-Cheng Mai

Sun Yat Sen Institute for Social Sciences and Philosophy; Tamkang University

Hiroshi Ohta

Aoyama Gakuin University

Abstract

This paper presents a vertical product differentiation model to examine the relationship between optimal trade policies and product qualities for different export countries under Cournot quantity competition as well as Bertrand price competition. We can also use this quality model to explain why Japan as a high production-cost country may have incentives to offer high subsidies. This is a case that cannot be explained by the strategic trade theory models à la Brander and Spencer (1985) or Eaton and Grossman (1986).

Suggested Citation

Hwang, Hong and Mai, Chao-Cheng and Ohta, Hiroshi, Export Subsidies, Cost Differential and Product Quality. Pacific Economic Review, Vol. 15, No. 1, pp. 32-41, February 2010, Available at SSRN: https://ssrn.com/abstract=1546189 or http://dx.doi.org/10.1111/j.1468-0106.2009.00487.x

Hong Hwang

National Taiwan University ( email )

21 Hsu Chow Road
Taipei 100, Taiwan
China

Chao-Cheng Mai

Sun Yat Sen Institute for Social Sciences and Philosophy ( email )

Taipei, 11529
Taiwan

Tamkang University

No.151 Yingzhuan Rd
Taiwan, 25137
China

Hiroshi Ohta

Aoyama Gakuin University ( email )

Tokyo, 150-8366
Japan
813-3409-8562 (Phone)
813-5485-0782 (Fax)

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