Working Paper: NBER ID: w2527
Authors: Kala Krishna; Marie Thursby
Abstract: Recent work in optimal trade policy for imperfectly competitive markets usually identifies the optimal level of an instrument, and when more instruments are allowed, general interpretations have been unavailable, This paper analyzes the jointly optimal levels of a Variety of instruments with oligopolistic competition. A targeting principle for identifying optimal policies is derived using the concept of a "strategic distortion." It is shown how optimal policies vary with the distortions present and the number of firms, as well as assumptions about market segmentation and regulation. The principles of targeting are illustrated using agricultural marketing boards.
Keywords: optimal trade policy; strategic distortions; oligopolistic competition; agricultural marketing boards
JEL Codes: D43; F13; L13
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| strategic distortions (F12) | optimal policies (C61) |
| government intervention (O25) | strategic distortion (L21) |
| marketing board monopoly power (L12) | production and consumption distortions (H31) |
| government intervention (O25) | production and consumption subsidies (H23) |
| regulations enforcing marginal cost pricing (D40) | new distortions (F12) |
| number of marketing boards (Q13) | consumption and production distortions (F62) |
| number of marketing boards (Q13) | government intervention (O25) |