Learning by doing, precommitment and infant-industry protection

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Title: Learning by doing, precommitment and infant-industry protection
Authors: Leahy, Dermot
Neary, J. Peter
Permanent link: http://hdl.handle.net/10197/1748
Date: 24-Apr-1994
Abstract: This paper examines the implications for strategic trade policy of different assumptions about precommitment. In a dynamic oligopoly game with learning by doing, the optimal first-period subsidy is lower if firms cannot precommit to future output than if they can; and is lower still if the government cannot precommit to future subsidies. In the linear case the optimal subsidy is increasing in the rate of learning with precommitment, but decreasing in it if the government cannot precommit. The infant-industry argument is thus reversed in the absence of precommitment, which has important implications for economic policy in dynamic environments.
Type of material: Working Paper
Publisher: University College Dublin. School of Economics
Keywords: Strategic trade policy;Precommitment;Learning by doing;Infant industry protection;Time consistency
Subject LCSH: Commercial policy--Mathematical models
Protectionism--Mathematical models
Language: en
Status of Item: Not peer reviewed
Appears in Collections:Economics Working Papers & Policy Papers

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