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International competition in vertically differentiated markets with innovation and imitation: trade policy versus free trade
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SYSNO ASEP 0439524 Document Type J - Journal Article R&D Document Type Journal Article Subsidiary J Článek ve WOS Title International competition in vertically differentiated markets with innovation and imitation: trade policy versus free trade Author(s) Kováč, E. (SK)
Žigić, Krešimir (NHU-C) RIDSource Title Economica - ISSN 0013-0427
Roč. 81, č. 323 (2014), s. 491-521Number of pages 31 s. Publication form Print - P Language eng - English Country GB - United Kingdom Keywords model of price competition ; trade policy ; free trade Subject RIV AH - Economics Institutional support NHU-C - PRVOUK-P23 UT WOS 000337669700005 EID SCOPUS 84902264087 DOI 10.1111/ecca.12093 Annotation The competition between firms from developed (DC) and less developed countries (LDC) is typically in vertically differentiated products. We consider a model of price competition between DC and LDC firms with quality choice and imitation, and study the effects of ex post tariffs. The government faces a choice between commitment to free trade and imposing a tariff. Tariffs can lead to change in the rank of qualities compared to free trade. We identify conditions under which this quality reversal takes place, and show that quality reversal is necessary for trade policy to be superior to free trade in welfare terms. Workplace Economics Institute - CERGE Contact Tomáš Pavela, pavela@cerge-ei.cz, Tel.: 224 005 122 Year of Publishing 2015
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