Learning by doing in international subsidy games

A series of two-period, three-stage games with learning by doing is developed. In the first stage firms choose first-period outputs. Then governments choose export subsidies. Finally firms choose second-period outputs. I show (i) firms use first-period outputs strategically to manipulate export subsidies and the second-periods outputs of rivals. (ii) These strategic effects are weakened when experience is diffused and by a third government tariff. (iii) When initial costs are symmetric and home residents partly own the foreign firm home outputs and subsidies exceed their foreign counterparts. These differentials increase in the speed of learning.

A hard copy is available in UCD Library at GEN 330.08 IR/UNI