Type

Working Paper

Authors

J. Peter Neary
Dermot Leahy

Subjects

Economics

Topics
protectionism mathematical models l52 infant industry protection learning by doing time consistency strategic trade policy f12 l13 commercial policy mathematical models precommitment

Learning by doing, precommitment and infant-industry protection (1994)

Abstract 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 government cannot precommit to future subsidies. In the linear case the optimal subsidy is increasing in the rate of learning with precommitment, but decreasing in it if the government cannot precommit. The infant-industry argument is thus reversed in the absence of precommitment, which has important implications for economic policy in dynamic environments.
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Full list of authors on original publication

J. Peter Neary, Dermot Leahy

Experts in our system

1
J. Peter Neary
University College Dublin
Total Publications: 79
 
2
Dermot Leahy
Maynooth University
Total Publications: 51