Does a ‘non-committed’ government always generate lower social welfare than its ‘committed’ counterpart? Strategic trade policy when consumer surplus matters

Trade, industrial, and privatization policies with endogenous market structure

“…This assumption is not entirely innocuous, and the analysis and policy implications might change if the government's ability to commit is absent (which might be the case in less developed countries contemplating privatization). The pioneering work on the issue of government commitment in international trade is the paper by Carmichael (1987) and many subsequent articles (see Neary & Leahy, 2000; Zigic, 2011). Haraguchi and Matsumura (2020) investigated the welfare consequences of a lack of commitment to future privatization policies.…”

Trade policy in markets with collusion: The case of North–South R&D spillovers

“…This seems a reasonable timing assumption in this context due to the fact that, in general, the government and firms are likely to differ in their ability to commit to future action (see Neary and Leahy, 2000;Žigić, 2011). In particular, in our setup, firms will be able to lobby for tariffs if they can show that their R&D efforts have been illegally appropriated by foreign firms.…”

Tariffs, market conduct and government commitment

“…In a similar setup but with output subsidies rather than tariffs, we proved that the government’s policy depends on the level of R&D investment and therefore is subject to manipulative behaviour from the domestic firm (Ionaşcu and Žigić, 2001). Another situation where the innovation effort influences the level of the optimal tariff arises when there are spillovers from the innovating to the non‐innovating firm (Žigić, 2003).…”

“…The second source of possible variations in our policy setup lies in the (in)ability of the domestic government to commit to its policy (Karp and Perloff, 1995; Neary and Leahy, 2000; Žigić, 2003). This idea can be traced back to Carmichael’s (1987) observation that governments often set the level of their policy instrument only after firms have already chosen the level of some strategic variable.…”

“…16 16 As Žigić (2003) shows, this is generally not true when there are R&D spillovers from the innovating to the non‐innovating firm. However, R&D spillovers are not a real possibility in our setup. …”