Vertical Foreclosure and International Trade Policy.
International differences in the cost of production of a key intermediate product can mean that a domestic firm is dependent on supplies from a foreign vertically integrated firm. This paper considers the incentives for the foreign firm and foreign country to supply the domestic firm when the firms compete in a Cournot or Bertrand market for the final product. The vertical supply decision is significantly affected by domestic supply conditions for the input and a domestic tariff on final product imports. Optimal policy by the exporting country may require a tax on both exports or a subsidy on both exports. Copyright 1991 by The Review of Economic Studies Limited.
Year of publication: |
1991
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Authors: | Spencer, Barbara J ; Jones, Ronald W |
Published in: |
Review of Economic Studies. - Wiley Blackwell, ISSN 0034-6527. - Vol. 58.1991, 1, p. 153-70
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Publisher: |
Wiley Blackwell |
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