We consider strategic trade policy when a high-cost and a low-cost firm belonging to two different countries compete in quantities in a third country, and technology is transferable via licensing. We characterize the effects of subsidies on (i) licensing payments-a new source of rents, (ii) the...

In a two-country segmented markets model with homogeneous product Cournot oligopoly we show that production efficiency improves in the free-trade regime compared to autarky, if autarky price in each country is lower than both the post-trade prices-which holds, for example, when preferences are...