Abstract
We shift the usual perspective of strategic trade policy - the setup - to the market framework in order to reconsider the consequences of government (in)ability to precommit to its policy and compare these findings with those analogous from the setup. In addition, we also analyze how robust the sign is of particular policy instruments (R&D subsidies) within the home setup, as opposed to the third setup, when there is a shift from second-best to the first-best policy. For that purpose, we apply a standard dynamic Cournot duopoly where the firm's strategic variable is investment in cost reduction whereas policy instruments are import tariffs and R&D subsidies.
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