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Armando Jose Garcia Pires
''Can Governments Reverse First-Mover Advantages of Foreign Competitors?''
( 2012, Vol. 32 No.2 )
We show that governments can use export subsidies to reduce or even reverse the first-mover advantages of foreign competitors. In particular, if the cost disadvantage of Stackelberg followers relatively to Stackelberg leaders is not too large, the export subsidy makes the former produce more than the latter. Welfare unambiguously increases in countries with Stackelberg followers and in consumer countries, but decreases in countries with Stackelberg leaders. In turn, depending on the relative difference in cost competitiveness between leaders and followers, welfare can either increase or decrease in the world economy.
Keywords: Export Subsidies, First-Mover Advantages, Asymmetric Competitiveness.
JEL: F1 - Trade: General
L1 - Market Structure, Firm Strategy, and Market Performance: General
Manuscript Received : Nov 02 2011 Manuscript Accepted : May 21 2012

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