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Strategic Trade Policy with Polynomial Costs

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  • Mark D. White

    (College of Staten Island/CUNY)

Abstract

 We investigate how the superiority of the optimal subsidy or tariff in an international Cournot oligopoly depends on the production technology used in the industry, an interesting issue that has not been analyzed in the literature. We establish that the welfare superiority of the optimal subsidy or tariff depends on the relative steepness of the firms' common marginal cost curve: when it is relatively steep, tariffs are superior to subsidies in enhancing domestic welfare, and vice versa. When both instruments are used simultaneously, the tariff component becomes more important as the marginal cost curve steepens.

Suggested Citation

  • Mark D. White, 2002. "Strategic Trade Policy with Polynomial Costs," Economics Bulletin, AccessEcon, vol. 6(6), pages 1-5.
    • Handle: RePEc:ebl:ecbull:eb-02f10006
    as

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    References listed on IDEAS

    as
    1. Jonathan Eaton & Gene M. Grossman, 1986. "Optimal Trade and Industrial Policy Under Oligopoly," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 101(2), pages 383-406.
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    JEL classification:

    • F1 - International Economics - - Trade

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