TY  - JOUR
AU  - Zhou,Dongsheng
AU  - Spencer,Barbara J.
AU  - Vertinsky,Ilan
TI  - Strategic Trade Policy with Endogenous Choice of Quality and Asymmetric Costs
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 7536
PY  - 2000
Y2  - February 2000
UR  - http://www.nber.org/papers/w7536
L1  - http://www.nber.org/papers/w7536.pdf
N1  - Author contact info:
Barbara J. Spencer
University of British Columbia
Sauder School of Business
2053 Main Mall
Vancouver, BC  V6T 1Z2
CANADA
Tel: 604/822-8479
Fax: 604/822-8477
E-Mail: barbara.spencer@sauder.ubc.ca
AB  - 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.
ER  -