Competition Policy, Export Subsidies and Economic Welfare

Abstract

We examine, in a three country model in oligopoly competition, the effect of competition policy by an import country on the timing of two export country subsidy game as well as economic welfare.Main conclusions in this paper are as follows: [1] If fixed cost for import country firms is low (high), then the free entry equilibrium number of firms is large (small) and the timing of export subsidy game is simultaneous (sequential). [2] Under the free entry policy by the import country, simultaneous intervention by two export countries does not affect the welfare of the import country but improves national welfare of each export country. [3] The free entry equilibrium number of firms is insufficient for maximizing national welfare of the import country.