Unionized Bertrand Duopoly and Strategic Export Policy

The paper reports that an export subsidy is optimal for a unionized Bertrand duopoly. Following results published by Brander and Spencer (Journal of International Economics, 1988, pp. 217-34), this establishes the robustness of export subsidization to the mode of competition (Cournot or Bertrand), and contrasts with nonunion results in the literature. If both firms are unionized and both governments pursue active trade policies, a subsidy remains optimal except for a narrow range of extreme substitutability between products. Nations with a lower opportunity cost of labor employ more aggressive policies in equilibrium