NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Optimal Policies with Strategic Distortions

Kala Krishna, Marie Thursby

NBER Working Paper No. 2527
Issued in February 1988
NBER Program(s):   ITI   IFM

Recent work in optimal trade policy for imperfectly competitive markets usually identifies the optimal level of an instrument, and when more instruments are allowed, general interpretations have been unavailable, This paper analyzes the jointly optimal levels of a Variety of instruments with oligopolistic competition. A targeting principle for identifying optimal policies is derived using the concept of a "strategic distortion." It is shown how optimal policies vary with the distortions present and the number of firms, as well as assumptions about market segmentation and regulation. The principles of targeting are illustrated using agricultural marketing boards.

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Published: Journal of International Economics Volume 31, 1991, pp. 291-308

 
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