Dumping and Double Crossing:  The (In)Effectiveness of Cost-Based Trade Policy Under Incomplete Information

Prusa, Thomas J.; Kolev, Dobrin R.

doi:10.3386/w6986

Cited by 18 publications

(21 citation statements)

References 8 publications

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“…We show that AD reduces the level of exports necessary for signaling so that first-period sales fall for the foreign firm and rise for the home firm. Reitzes (1993) and Kolev and Prusa (2002) obtain similar results but for different reasons. In their models the first-period game outcome is affected by AD as firms aim to influence future AD duties, but here it is affected as AD changes the cost of signaling.…”

Section: Introductionsupporting

confidence: 76%

“…For example, it may be interesting to consider the option for the foreign firm to relocate in the domestic market to avoid an AD duty (see, e.g., Miyagiwa and Ohno, 1995;Blonigen and Ohno, 1998;Blonigen, 2002), or allow for negotiated settlements leading to voluntary export restraints or price underpinning, common occurrences under AD threats (see e.g., Kolev and Prusa, 2002).…”

Section: Discussionmentioning

confidence: 99%

“…□ We end this section with a note on the recent work of Kolev and Prusa (2002), in which pooling arises as a unique equilibrium outcome. In their model, the uninformed home government uses the foreign firm's first-period exports to form beliefs about the foreign firm's costs and then uses the posterior beliefs to compute the optimal tariff in the second period.…”

Section: Proof Straightforward From Differentiation Of Eqs (2a′) Anmentioning

confidence: 97%

“…Of course, the high-cost type wants to reduce exports to discourage mimicry butKolev and Prusa (2002) show such an attempt is unsuccessful with restrictions on beliefs based on D1, a stronger refinement than the intuitive criterion.…”

mentioning

confidence: 96%

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Dumping as a signal of innovation

Miyagiwa

Ohno

2007

Journal of International Economics

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Section: Introductionsupporting

confidence: 76%

Section: Discussionmentioning

confidence: 99%

Section: Proof Straightforward From Differentiation Of Eqs (2a′) Anmentioning

confidence: 97%

mentioning

confidence: 96%

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Dumping as a signal of innovation

Miyagiwa

Ohno

2007

Journal of International Economics

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“…The additional complication in the present setting is that lower costs attract a higher tariff, from (12). In the two Kolev andPmsa papers (1999a, 1999b) which investigate this without the possibility of domestic entry, the foreign firm has an incentive to signal higher costs to elicit a lower tariff. The Milgrom-Roberts and KolevPrusa stories individually make for complicated models that ultimately rely on numerical simulations to demonstrate the existence and welfare properties of signaling equilibria, even with linear demands and constant costs.…”

mentioning

confidence: 99%

Infant Industry Protection Revisited

Bhattacharjea

2002

International Economic Journal

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In 1791, Alexander Hamilton suggested that assuring protection to domestic entrants Could pre-empt entry-degterrence by foreign firms. This paper reformulates his Argument in game-theoretic terms with asymmetric cost information, imposing the Requirement that both the foreign firm's threat and the home governments's promise of Protection should be credible. It derives a simple optimal tariff formula that depends Only on the expectation of foreign costs. It then shows that this tariff can lead to Welfare-decreasing entry, but only if thee foreign is relatively inefficient. However, If the formula is applied with dynamic consistency, and is rationally anticipated by both foreign and domestic firms, it prevents foreign entry-deterrence and improves deomestic welfare. [F13, 019]

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Geography, competition, and optimal multilateral trade policy

Nocco

Ottaviano

Salto

2019

Journal of International Economics

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How should multilateral trade policy be designed in a world in which countries differ in terms of market access and technology, and firms with market power differ in terms of productivity? We answer this question in a model of monopolistic competition in which variable markups increasing in firm size are a key source of misallocation across firms and countries. We use `disadvantaged' to refer to countries with smaller market size, worse state of technology (in terms of higher innovation and production costs), and worse geography (in terms of more remoteness from other countries). We show that, in a global welfare perspective, optimal multilateral trade policy should: promote the sales of low cost firms to all countries, but especially to disadvantaged ones; trim the sales of high cost firms to all countries, but especially to disadvantaged ones; reduce firm entry in all countries, but especially in disadvantaged ones. This would not only restore efficiency but also reduce welfare inequality between advantaged and disadvantaged countries if their differences in market size, state of technology and geography are large enough.

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Dumping and Double Crossing: The (In)Effectiveness of Cost-Based Trade Policy Under Incomplete Information

Cited by 18 publications

References 8 publications

Dumping as a signal of innovation

Dumping as a signal of innovation

Infant Industry Protection Revisited

Geography, competition, and optimal multilateral trade policy

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