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    Rivalry in uncertain export markets: commitment versus flexibility

    Dewit, Gerda (2004) Rivalry in uncertain export markets: commitment versus flexibility. Journal of International Economics, 64. pp. 195-209. ISSN 0022-1996

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    This paper examines optimal trade policy in a two-period oligopoly model, with a home and a foreign firm choosing capital and output. Demand uncertainty, resolved in period two, gives rise to a trade-off between strategic commitment and flexibility in the firms’ investment decisions. Firms’ investment timing is endogenous and can be manipulated by the home government, which sets a subsidy before firms decide when to invest. We show that when the government wishes to manipulate investment timing, it will choose its policy to deter investment commitment by the home or the foreign firm.

    Item Type: Article
    Keywords: Demand uncertainty; Strategic commitment; Flexibility; Trade policy; Commitment deterrence;
    Academic Unit: Faculty of Social Sciences > Economics, Finance and Accounting
    Item ID: 8441
    Depositing User: Gerda Dewit
    Date Deposited: 12 Jul 2017 10:36
    Journal or Publication Title: Journal of International Economics
    Publisher: Elsevier
    Refereed: Yes
    Use Licence: This item is available under a Creative Commons Attribution Non Commercial Share Alike Licence (CC BY-NC-SA). Details of this licence are available here

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