Protectionism versus non-protectionism under cost uncertainty in Cournot and Stackelberg markets

Orbay B.

3rd International Meeting of the Society-for-the-Advancement-of-Economic-Theory, Antalya, Turkey, 01 June 1997, vol.8, pp.347-365 identifier

  • Publication Type: Conference Paper / Full Text
  • Volume: 8
  • City: Antalya
  • Country: Turkey
  • Page Numbers: pp.347-365
  • Istanbul Technical University Affiliated: No


This paper compares optimal protectionist trade policies with optimal non-protectionist policies in an environment where governments have private information about the marginal costs of the domestic: firms. A country with an efficient firm is always better off not protecting its firm and subsidizing both domestic and foreign firms compared to being protectionist by taxing imports. However, under some circumstances, a country with an inefficient firm does better being protectionist and taxing:imports.