Abstract
Abstract The paper generalises the static Cournot oligopoly model of international trade to a dynamic context and derives optimal trade policies. It is found that an export subsidy is the optimal instrument for intervention by the domestic country when the domestic and foreign firms compete only in a third market. When domestic consumption is allowed for the optimal policy is a production subsidy. It is found that unlike the static Cournot case, in the dynamic version the reaction curves of both firms shift when a tax/subsidy is imposed.
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