COST ASYMMETRIES AND INDUSTRIAL POLICY IN VERTICALLY RELATED MARKETS*

Yasushi Kawabata

8 citations0/0 files storedManchester School

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Global trade and economics Merger and Competition Analysis Global Trade and Competitiveness

Abstract

In this paper we examine how the conventional finding from de Meza (Canadian Journal of Economics, Vol. 19 (1986), pp. 347–350) and Neary (Journal of International Economics, Vol. 37 (1994), pp. 197–218) that the country with the lowest‐cost firm provides the highest subsidy modifies in a model of vertically related markets characterized by Cournot competition. We show that the country where the sum of the costs of final‐good production and intermediate‐good production are the lowest provides the largest production subsidies to the final good and/or the intermediate good.

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References

1985Export subsidies and international market share rivalry 1994Cost asymmetries in international subsidy games: Should governments help winners or losers?1999Rent-shifting export subsidies with an imported intermediate product 2004White paper on international economy and trade 1986Export Subsidies and High Productivity: Cause or Effect?1997Strategic Trade Policy in a Vertically Related Industry 1997Demand elasticities, asymmetry and strategic trade policy 2004Conjectural Variations, Market Power, and Optimal Trade Policy in a Vertically Related Industry

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