In this Paper, we analyse the following policy dilemma: strategic trade policy versus free trade when the domestic government is bound to intervene only after the domestic firm's strategic variable is chosen. This intervention allows the domestic firm to manipulate the domestic government and...

In an environment in which home firm costs are private information, home firm output can signal these costs to a foreign competitor and a home policy maker. High-cost home firms have an incentive to misrepresent themselves as low-cost. This is understood by the foreign firm and the home...

We study a general equilibrium model of international trade with heterogeneous firms, where countries can strategically invest in technology. The countries' motive is to improve firms' productivity, leading to a competitive advantage in international trade. We are interested in how trade...

This paper shows that governments have no incentive to introduce non-tariff barriers when they are free to set tariffs but they do when tariffs are determined cooperatively. We then show three results. First, with trade liberalization, there is a progression from using tariffs only to quotas,...

The important characteristic of international competition between developed and less developed countries is vertical product differentiation, where firms' quality choices represent strategic decisions. Unlike the previous literature, we allow for a leadership in quality choice and the...

This paper examines Krugman's (1984a) argument that under increasing returns to scale import protection may act as a form of export promotion. We formally prove Krugman's result by explicitly using stability conditions for a multimarket Nash equilibrium. However, if marginal costs were...

This Paper surveys the ways in which departures from free trade have been treated in economic analysis. Normative theories linked to classical arguments have shown how departure from free trade can enhance efficiency and increase social welfare. Positive perspectives with links to...

We analyse the following policy dilemma: strategic trade policy versus free trade when the domestic government is bound to intervene only after the domestic firm's strategic variable in the form of R&D investment is chosen, and when the information can be either symmetric or asymmetric. The...