This paper examines the optimality of export subsidies in oligopolistic markets, when home and foreign firms have different costs and there is an opportunity cost to public funds. Subsidies are found to be optimal only for surprisingly low values of the shadow price of government funds, and if...

This paper explores the links between international trade theory and the practice of trade and industrial policy in open economies, with special attention to three areas where theoretical lessons have been misunderstood in policy debates. It argues that the ‘concertina rule’ for tariff...

We examine optimal industrial and trade policies in a series of dynamic oligopoly games in which a home and a foreign firm compete in R&D and output. Alternative assumptions about the timing of moves and the ability of agents to commit intertemporally are considered. We show that the home export...

We characterize optimal trade and industrial policy in dynamic oligopolistic markets. If governments can commit to future policies, optimal first-period intervention should diverge from the profit-shifting benchmark to an extent which exactly offsets the strategic behaviour implied by Fudenberg...

The theory of strategic trade policy yields ambiguous recommendations for assistance to exporting firms in oligopolistic industries. Some writers have, however, suggested that investment subsidies are a more robust recommendation than export subsidies. We show that, though ambiguous in...

This paper examines the implications for strategic trade policy of different assumptions about precommitment. In a dynamic oligopoly game with learning by doing, the optimal first-period subsidy is lower if firms cannot precommit to future output than if they can; and is lower still if the...