The outcome of trade policies to increase access for foreign firms to the home country's market is shown to be sensitive to the implementation procedure used. The importance of the timing of moves between government and firms is highlighted by focusing on taxes and subsidies to implement minimum market share requirements. Both taxes and subsidies chosen by the home government after firms have picked prices create powerful incentives for firms to raise prices - effects that are similar in nature to those found with quotas/VERs. We show that some degree of imprecision in implementing the target engenders less anticompetitive outcomes relative to perfect enforcement.
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number
5593.
Length: Date of creation: May 1996 Date of revision: Handle: RePEc:nbr:nberwo:5593
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Krishna, K & Thursby, M & Roy, S, 1996.
"Implementing Market Access,"
Papers
96-011, Purdue University, Krannert School of Management - Center for International Business Education and Research (CIBER).
Krishna, K & Roy, S & Thursby, M, 1996.
"Implementaing Market Access,"
Papers
96-003, Purdue University, Krannert School of Management - Center for International Business Education and Research (CIBER).
Find related papers by JEL classification: F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
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Krishna, K. & Roy, S. & Thursby, M., 1998.
"Can Subsidies for MARs be Procompetitive,"
Papers
98-008, Purdue University, Krannert School of Management - Center for International Business Education and Research (CIBER).