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Title: |
The Welfare Analysis of Trade Policies: The Optimal Government
Intervention Timing under Incomplete Information |
| Author: |
Kim, Young-Han |
| Author
Affiliation: |
Hankuk U Foreign Studies |
| Source: |
International Economic Journal, Winter 1999, v. 13, no. 4, pp. 53-70 |
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Publication Date: |
Winter 1999 |
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Abstract: |
This paper examines the welfare effects of
the government trade policy when the government intervenes as a second
mover under incomplete information. When the government decides her
trade policy after an exporting firm decides its strategy, both the high
quality firm (H) and the low quality firm (L) use their first mover
advantage to raise the price in addition to H's upward price distortion
for signaling purposes, and the government offers export subsidies to
compensate for the price increase. It is shown that in the presence of a
distortionary cost of raising government revenue, social welfare is
highest when the government is a first mover, followed by
non-intervention; social welfare is lowest when the government is a
second mover. |
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