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Strategic Trade Policy in the Presence of Consumer Learning

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  • Charlotte Wojcik

Abstract

This paper explores the potential role for strategic trade policy when demand is impacted by consumer learning. In a linear Cournot model, the optimal subsidy is shown to be increasing in both the firm‐specific learning and learning spillovers among home firms when firms can precommit; however, when precommitment by firms and/or the government is not possible, strategic behaviour by firms may more than offset the infant industries' incentive for an export subsidy. A calibration exercise illustrates the impact of consumer learning on the optimal subsidies and also demonstrates the sensitivity of the policy prescription.

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  • Charlotte Wojcik, 2000. "Strategic Trade Policy in the Presence of Consumer Learning," Economica, London School of Economics and Political Science, vol. 67(266), pages 283-295, May.
    • Handle: RePEc:bla:econom:v:67:y:2000:i:266:p:283-295
    DOI: 10.1111/1468-0335.00208
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