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Optimal export policy with upstream price competition

Author

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  • Tomomichi Mizuno

    (Graduate School of Economics, Kobe University)

  • Kazuhiro Takauchi

    (Faculty of Business and Commerce, Kansai University)

Abstract

We constructed a third-market model with a vertical trading structure in which input suppliers engage in the homogeneous price competition `a la Dastidar (1995). We show that in the case of downstream Bertrand competition, a non-monotonic export policy may appear, that is, the optimal export policy can change like a tax-subsidy-tax as the degree of product-substitutability rises. We also show that when the number of domestic input suppliers is at an intermediate level, the conventional result in which the optimal policy is an export subsidy (tax) if downstream is Cournot (Bertrand) rivalry remains. We further discuss welfare comparisons between downstream Cournot and Bertrand cases.

Suggested Citation

  • Tomomichi Mizuno & Kazuhiro Takauchi, 2018. "Optimal export policy with upstream price competition," Discussion Papers 1805, Graduate School of Economics, Kobe University.
    • Handle: RePEc:koe:wpaper:1805
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    References listed on IDEAS

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    1. Dastidar, Krishnendu Ghosh, 1995. "On the Existence of Pure Strategy Bertrand Equilibrium," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 5(1), pages 19-32, January.
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    3. Marie‐Laure Cabon‐Dhersin & Nicolas Drouhin, 2014. "Tacit Collusion in a One‐Shot Game of Price Competition with Soft Capacity Constraints," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 23(2), pages 427-442, June.
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    6. Ishikawa, Jota & Spencer, Barbara J., 1999. "Rent-shifting export subsidies with an imported intermediate product," Journal of International Economics, Elsevier, vol. 48(2), pages 199-232, August.
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    Cited by:

    1. Kazuhiro Takauchi & Tomomichi Mizuno, 2022. "Endogenous transport price, R&D spillovers, and trade," The World Economy, Wiley Blackwell, vol. 45(5), pages 1477-1500, May.
    2. Tomomichi Mizuno & Kazuhiro Takauchi, 2024. "Bertrand competition in vertically related markets," Applied Economics Letters, Taylor & Francis Journals, vol. 31(6), pages 524-529, March.
    3. Kazuhiro Takauchi & Tomomichi Mizuno & Katsufumi Fukuda, 2024. "Strategic Export Decisions in International Trade," Discussion Paper Series DP2024-21, Research Institute for Economics & Business Administration, Kobe University.
    4. Kazuhiro Takauchi & Tomomichi Mizuno, 2019. "Is competition in the transport industry bad?A welfare analysis of R&D with inter-regional transportation," Discussion Papers 1910, Graduate School of Economics, Kobe University.
    5. Tai‐Liang Chen & Ying Kuang, 2023. "Endogenous timing, strategic tariff game and bilateral trade in vertical oligopoly," Pacific Economic Review, Wiley Blackwell, vol. 28(1), pages 74-96, February.
    6. Jung-Fa Tsai & Chin-Po Wang & Ming-Hua Lin & Shih-Wei Huang, 2021. "Analysis of Key Factors for Supplier Selection in Taiwan’s Thin-Film Transistor Liquid-Crystal Displays Industry," Mathematics, MDPI, vol. 9(4), pages 1-18, February.

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    More about this item

    Keywords

    Upstream price competition; Export subsidy/tax; Non-monotonic policy; Product substitutability;
    All these keywords.

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection

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