@techreport{NBERw7536,
 title = "Strategic Trade Policy with Endogenous Choice of Quality and Asymmetric Costs",
 author = "Dongsheng Zhou and Barbara J. Spencer and Ilan Vertinsky",
 institution = "National Bureau of Economic Research",
 type = "Working Paper",
 series = "Working Paper Series",
 number = "7536",
 year = "2000",
 month = "February",
 URL = "http://www.nber.org/papers/w7536",
 abstract = {This paper examines the strategic trade policy incentives for investment policies towards quality improvements in a vertically differentiated exporting industry. Firms first compete in qualities and then export to a third country market based on Bertrand or Cournot competition.  Optimal policies are asymmetric across the two producing countries. Under Bertrand competition, the low-quality country subsidizes investment to raise export quality, while the high-quality country imposes a tax so as to reduce the quality of its already high quality exports. Under Cournot competition, the results are reversed with a tax in the low-quality country and a subsidy in the high-quality country.},
}