|
| |
| Haokai Ning, Xiaoyang Dang and Sisi Yan |
| |
| ''On production subsidies and import tariffs under uncertainty'' |
| ( 2025, Vol. 45 No.2 ) |
| |
| |
| This paper examines the welfare consequences of production subsidies and import tariffs in a differentiated Cournot duopoly under market demand uncertainty. Utilizing the import-competing framework, we show that the first best policy combines production subsidies and import tariffs. When the domestic government is limited to using only one policy instrument, the superiority of production subsidies over import tariffs depends on the international cost disparity between domestic and foreign firms. Moreover, Laissez-faire yields the lowest expected social welfare for the domestic country. Our results on policy rankings hold regardless of market volatility or the degree of product differentiation. |
| |
| |
| Keywords: Uncertainty, Differentiated Duopoly, Production Subsidy, Import Tariff, Cournot Competition |
JEL: F1 - Trade: General
D8 - Information, Knowledge, and Uncertainty: General |
| |
| Manuscript Received : Aug 26 2024 | | Manuscript Accepted : Jun 30 2025 |
|
