Template-Type: ReDIF-Paper 1.0
Title: Strategic Trade Policy under Asymmetric Information about Market Demand
Author-Name: Frank Schuhmacher
Classification-JEL: F13
Keywords: Strategic trade policy, asymmetric information, market demand
Abstract: This paper examines strategic trade policy with unilateral intervention under asymmetric 
 information about market demand. In an international Cournot-duopoly, the choice of the 
 domestic country's export subsidy signals the domestic country's private information to the 
 foreign firm. It is shown that this signalling effect weakens the well-known commitment effect 
 of positive export subsidies. The optimal export subsidy under asymmetric information is 
 smaller than the optimal export subsidy with perfect information. If the range of the uncertain 
 market demand is sufficiently large, then the optimal export subsidy is negative and the 
 domestic country's welfare may be smaller than the foreign country's welfare.
Series:	Sonderforschungsbereich 303, University of Bonn, Germany
Length: 
Creation-Date: 
File-URL: http://www.wiwi.uni-bonn.de/bgsepapers/bonsfa/bonsfa573.ps
File-Format: application/postscript
File-Size: 207215 bytes
Handle:	RePEc:bon:bonsfa:573