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Title Export Subsidies and Least Developed Countries: An Entry-Deterrence Model under Complete and Incomplete Information
Author Kyoungwon Rhee (Dongguk University) and Moonsung Kang (Korea University)
Volume 35 Number 1
Pages 163-182 
Keywords Export Subsidies, Least Developed Countries, Entry-Deterrence Model,
Abstract To explore the export subsidy policies in technologically inferior countries, we consider an
entry-deterrence model in which firms compete á la Bertrand if entry occurs. Under
complete information, only a subsidy policy can deter entry. We also check whether a no
subsidy policy can deter entry under incomplete information, in which the existence of an
export subsidy policy is assumed to be unknown to the foreign firm. In the separating
equilibria, it is optimal for the government not to provide export subsidies because they are
financially burdensome given the technological inferiority of the domestic firm being
subsidized. However, in the pooling equilibria, under certain conditions, even the firm that
does not benefit from a subsidy policy can deter the entry of a more technologically advanced
firm, thereby granting an incentive for the government to employ a policy of strategic
ambiguity in order to prevent the disclosure of information about its export subsidies.
File KER-20190101-35-1-06.pdf
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