Optimal Trade Policies and Production Technology in Vertically Related Markets*

Hwang, Hong; Lin, Yan-Shu; Yang, Ya‐Po

doi:10.1111/j.1467-9396.2007.00669.x

Cited by 19 publications

(19 citation statements)

References 23 publications

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“…This case can be interpreted as the case where a home and a foreign firm producing a homogeneous intermediate good compete in a Bertrand duopoly. 6 The assumption that the final-good firms take the price of the intermediate good as given is made in Bernhofen (1995Bernhofen ( , 1997, Ishikawa and Lee (1997), Ishikawa and Spencer (1999) and Hwang et al (2007). But this assumption is open to the criticism that the final-good firms have no market power as buyers of the intermediate good even though they have market power as sellers of the final good.…”

Section: The Modelmentioning

confidence: 99%

“…However, if the final goods are sufficiently differentiated, bilateral export taxation is welfare reducing compared with free trade. 1 Papers on strategic trade policy in vertically related markets include Jones (1991, 1992), Bernhofen (1995Bernhofen ( , 1997, Ishikawa and Lee (1997), Ishikawa and Spencer (1999), Chang and Sugeta (2004) and Hwang et al (2007). 2 Using the result in Kreps and Scheinkman (1983) that quantity precommitment and Bertrand competition yield Cournot outcomes, we can assume that a home and a foreign intermediate-good firm make capacity choices first and then engage in Bertrand price competition subject to their supply limits.…”

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confidence: 99%

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Strategic Export Policy in Vertically Related Markets

Kawabata

2010

Bulletin of Econ Res

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This paper analyses how strategic export policies are affected by introducing an imperfectly competitive intermediate good into a Bertrand duopoly model with product differentiation, where a home and a foreign final-good firm export to a third-country market. It is shown that when the home and foreign markets for the intermediate good are segmented, the optimal export policy towards the final good is a tax. In contrast, under integrated markets, the optimal export intervention is a subsidy. Whether bilateral export intervention is welfare improving compared with free trade, depends on the degree of product differentiation between the home and foreign final goods.

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Section: The Modelmentioning

confidence: 99%

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confidence: 99%

Strategic Export Policy in Vertically Related Markets

Kawabata

2010

Bulletin of Econ Res

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“…Finally, the present study might also be extended to the analysis of the optimal import policy. Both Hwang et al (2003) and Hwang et al (2007) find that when the derived demand for the intermediate good is very convex to the origin under Cournot competition, a tariff on the intermediate good will raise the price of the intermediate good by more than the tariff rate. This will, in turn, decrease the profit of the domestic firm and the welfare level of the domestic country.…”

Section: Discussionmentioning

confidence: 99%

Symbiotic Production and Optimal Export Policy

Liang

Mai

Wang

2012

Pacific Economic Review

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Abstract. This paper constructs a two-country trade model to examine the optimal policies on the exports of final and intermediate products under Cournot as well as Bertrand competition when firms engage in symbiotic production internationally. The paper shows that given linear demand for the final product, the optimal export policies are to tax the exports of both the final and intermediate goods under symbiotic production, no matter whether firms engage in Cournot or Bertrand competition in the final good market, which is contrary to the conventional wisdom. * Address for Correspondence: Department of Industrial Economics, Tamkang University, Tamsui, Taipei County, Taiwan 21537, ROC. Tel: 886-2-2625-1863, Fax: 886-2-2620 ccmai@gate.sinica.edu.tw. We are grateful to two anonymous referees for very useful comments and suggestions. The first author would like to thank Tamkang University for financial support.

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“…We assume that, for supplier k, the cost for producing 8 For simplicity, we omit trade costs in this analysis. 9 Ishikawa and Spencer (1999) and Hwang et al (2007) also consider a unilateral intervention.…”

Section: Modelmentioning

confidence: 99%

Optimal Export Policy With Upstream Price Competition

Mizuno

Takauchi

2019

The Manchester School

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We present a third‐market model with a vertical trading structure, in which upstream input suppliers engage in homogeneous price competition. We show that, under downstream Bertrand competition, a non‐monotonic export policy may result. Specifically, the optimal policy of the exporting country can turn into a tax–subsidy–tax as the degree of product substitutability rises. We also confirm the conventional result for which the optimal policy is an export subsidy (tax) if there is Cournot (Bertrand) competition downstream, provided that the number of domestic suppliers is at an intermediate level. We further discuss bilateral policy interventions when both exporting countries offer a subsidy/tax to their domestic downstream firms. We show that a non‐monotonic export policy (tax–subsidy–tax) can arise even in this extended setting.

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Optimal Trade Policies and Production Technology in Vertically Related Markets*

Cited by 19 publications

References 23 publications

Strategic Export Policy in Vertically Related Markets

Strategic Export Policy in Vertically Related Markets

Symbiotic Production and Optimal Export Policy

Optimal Export Policy With Upstream Price Competition

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