Free trade versus strategic trade as a choice between two ‘second best’ policies: A symmetric versus asymmetric information analysis

Ionaşcu, Delia; Žigić, Krešimir

doi:10.1080/10168730500199640

Cited by 8 publications

(13 citation statements)

References 14 publications

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“…However, the independence of the optimal policy instrument on domestic R&D breaks down in the case of subsidies. 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).…”

Section: The ‘Non‐committed’ Domestic Governmentmentioning

confidence: 76%

“…Free trade equilibrium serves as an important general benchmark for comparison with other policy options. In our case, the comparison of free trade with the ‘non‐commitment’ policy regime is of special interest, given the critique that the government’s inability to pre‐commit to its policy may lead to a lower social welfare compared with free trade (Grossman and Maggi, 1998; Ionaşcu and Žigić, 2001; Karp and Perloff, 1995; Neary and Leahy, 2000).…”

Section: Free Tradementioning

confidence: 99%

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Tariffs, market conduct and government commitment

Baghdasaryan¹,

Žigić²

2009

Economics of Transition

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We analyse a simple 'tariffs cum foreign competition' policy targeted at enhancing the competitive position of a domestic, developing country firm that competes with its developed country counterpart on the domestic market and that carries out an innovative (or imitative) effort. We evaluate this policy with respect to social welfare, type of oligopoly conduct, information requirement, time consistency and possibility of manipulative behaviour and conclude that the most robust policy setup is one in which the domestic government is unable to pre-commit to the level of its policy. We also study how the unit cost heterogeneity of the domestic firm affects trade protection. Copyright (c) 2010 The Authors. Journal compilation (c) 2010 The European Bank for Reconstruction and Development.

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Section: The ‘Non‐committed’ Domestic Governmentmentioning

confidence: 76%

Section: Free Tradementioning

confidence: 99%

Tariffs, market conduct and government commitment

Baghdasaryan¹,

Žigić²

2009

Economics of Transition

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“…The strategic variable, y, can assume various interpretations, like upfront investment in capital or knowledge, as in Grossman and Maggi (1998), or a variable related to R&D investment (''R&D cost function'' as in Žigić , 2003 or Ionas ßcu andŽigić , 2005). The point is that in each of these interpretations, these investments are assumed to reduce the marginal costs of the domestic firm by y.…”

Section: Assumptionsmentioning

confidence: 98%

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

Žigić

2011

Journal of Comparative Economics

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“…However, this problem disappears if, as assumed by Gruenspecht (1988), the opportunity important context, yet still within the third market framework. In this setup, domestic firms undertake some kind of strategic investment prior to market competition (see for instance, Goldberg, 1995;Karp and Perloff, 1995;Neary and O'Sullivan, 1997;Grossman and Maggi, 1998;Neary and Leahy, 2000;and Ionaşcu and Žigić, 2005).…”

Section: Introductionmentioning

confidence: 99%

Government's (In)Ability to Precommit, and Strategic Trade Policy: The 'Third Market' Versus the 'Home Market' Setup

Žigić

2007

SSRN Journal

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We shift the usual perspective of strategic trade policy-the "third market setup"-to the "home market" framework in order to reconsider the consequences of government (in)ability to precommit to its policy and compare these findings with those analogous from the "third market setup". In addition, we also analyze how robust the sign is of particular policy instruments (R&D subsidies) within the home market setup, as opposed to the third market setup, when there is a shift from "second-best" to the "first-best" policy. For that purpose, we apply a standard dynamic Cournot duopoly where the firm's strategic variable is investment in cost reduction whereas policy instruments are import tariffs and R&D subsidies. Abstrakt Posouváme obvyklé vnímání strategické obchodní politiky od "modelu třetího trhu" k "domácímu trhu" ve snaze zvážit důsledky (ne)schopnosti vlády zavázat se ke své politice a porovnat tato zjištění s těmi analogickými z "modelu třetího trhu". Rovněž analyzujeme, jak robustní je znaménko jednotlivých nástrojů politik (dotace na R&Dvýzkum a rozvoj) v modelu domácího trhu jako protějšku modelu třetího trhu, kdy dochází k přesunu od "druhé nejlepší" k "první nejlepší" politice. Za tím účelem aplikujeme standardní dynamický Cournotův duopol, kde jsou strategickou proměnnou firmy investice do redukce nákladů, zatímco politické nástroje jsou dovozní tarify a dotace na výzkumu a rozvoj (R&D).

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Free trade versus strategic trade as a choice between two ‘second best’ policies: A symmetric versus asymmetric information analysis

Cited by 8 publications

References 14 publications

Tariffs, market conduct and government commitment

Tariffs, market conduct and government commitment

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

Government's (In)Ability to Precommit, and Strategic Trade Policy: The 'Third Market' Versus the 'Home Market' Setup

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