Learning by Doing, Precommitment and Infant-Industry Promotion.
The authors examine the implications for strategic trade policy of different assumptions about precommitment in a two-period Cournot oligopoly game with learning by doing. The inability of firms and governments to precommit to future actions encourages strategic behavior which justifies an optimal first-period export tax relative to the profit-shifting benchmark of an export subsidy. In the linear case, the optimal subsidy is increasing in the rate of learning with government precommitment bu...Expand abstract
- Review of Economic Studies
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