TY  - JOUR
AU  - Krishna,Kala
AU  - Roy,Suddhasatwa
AU  - Thursby,Marie
TI  - Procompetitive Market Access
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 6184
PY  - 1997
Y2  - September 1997
UR  - http://www.nber.org/papers/w6184
L1  - http://www.nber.org/papers/w6184.pdf
N1  - Author contact info:
Kala Krishna
Department of Economics
523 Kern Graduate Building
The Pennsylvania State University
University Park, PA 16802
Tel: 814/865-1106
Fax: 814/863-4775
E-Mail: kmk4@psu.edu

Marie C. Thursby
College of Management
Georgia Institute of Technology
800 West Peachtree Street, NW
Atlanta, GA 30308-1149
Tel: 404/894-6249
Fax: 404/385-4894
E-Mail: marie.thursby@mgt.gatech.edu
AB  - The view that U.S. businesses are being unfairly hurt by barriers to access in foreign markets has raised demands for market access requirements (MARs) from within U.S. industry and government alike.  We show that, contrary to the prevailing wisdom of the recent literature, MARs can be implemented in a procompetitive manner.  The basic idea is that the requirement must be implemented in a way that provides the right incentives for increasing aggregate output or lowering prices.  We provide two examples to illustrate this point.  In the context of a Cournot duopoly, we show that an implementation scheme in which the U.S. firm receives a pre-announced subsidy if the market share target is met leads to increased aggregate output.  In a second example, we show that a MAR on an imported intermediate input can lead not only to increased imports of the intermediate good, but also to increased output in the final good market using the input.  The intuition is that increasing output of the final good helps to make the MAR less binding and this reduces the marginal cost of production in the final good market.  Thus our results buttress the point made in Krishna, Roy and Thursby (1997) that the effects of MARs depend crucially on the details of their implementation.
ER  -