Abstract
This paper analyzes strategic trade policy when home and foreign duopolists produce a durable good that is either sold or leased in a third country. Durability is important for two reasons: it characterizes most of the products discussed in the strategic trade literature, and it also calls for explicit dynamic modeling. For duopolists who sell their product in a third-country market, this paper finds the optimal policy to be a tax on domestic output. For duopolists who lease the good in a third-country market, though, the optimal policy is a subsidy.
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