The paper models international rivalry between a domestic firm that is going through a learning-by-doing phase, and a mature foreign rival. It is shown that the optimal production subsidy for the domestic firm depends on the degree of strategic sophistication of the foreign firm. Optimal...

The authors examine the role of strategic interactions among a small number of financial intermediaries who know that the current financial regime is subject to change. The current financial regime offers protection to the intermediaries against bad outcomes. Each financial intermediary's...

This paper examines how trade liberalization affects the innovation incentives of firms, and what this implies for industry productivity and social welfare. For this purpose we develop a reciprocal dumping model of international trade with heterogeneous firms and endogenous R&D. We identify two...