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Evidence on Imperfect Competition and Strategic Trade Theory

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  • Reimer, Jeffrey J.
  • Stiegert, Kyle W.
Abstract
Strategic trade theory shows that government intervention in markets with small numbers of traders can boost the welfare of a country relative to free trade. This survey critically assesses the empirical evidence regarding this possibility. One finding is that while many international food and agricultural markets are characterized by oligopoly, price-cost markups tend to be small, and the potential gains from intervention are modest at best. In turn, existing government interventions such as agricultural export subsidies are generally not optimal in a strategic trade sense. The evidence suggests that oligopoly by itself is not a sufficient rationale for deviating from free trade in international markets.

Suggested Citation

  • Reimer, Jeffrey J. & Stiegert, Kyle W., 2006. "Evidence on Imperfect Competition and Strategic Trade Theory," Staff Papers 12609, University of Wisconsin-Madison, Department of Agricultural and Applied Economics.
    • Handle: RePEc:ags:wisagr:12609
    DOI: 10.22004/ag.econ.12609
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    Cited by:

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    6. Qianqian Shao & Thorsten Janus & Maarten J. Punt & Justus Wesseler, 2018. "The Conservation Effects of Trade with Imperfect Competition and Biased Policymakers," Agriculture, MDPI, vol. 8(7), pages 1-22, July.
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    8. Uttam Kumar Deb, 2007. "Agricultural Trade Protection: A Perspective from India," ARTNeT Policy Briefs 11, United Nations Economic and Social Commission for Asia and the Pacific (ESCAP).
    9. May, Daniel E., 2011. "Incentives of small countries to participate in a global free trade agreement in agriculture: a theoretical analysis," Economia Agraria y Recursos Naturales, Spanish Association of Agricultural Economists, vol. 15.
    10. May, Daniel E., 2011. "Bilateralism in Agriculture when Countries use Distorting Domestic Policies," 2011 International Congress, August 30-September 2, 2011, Zurich, Switzerland 114657, European Association of Agricultural Economists.
    11. Biswajit Dhar, 2007. "Agricultural trade and government intervention - A persepctive from a developing country," STUDIES IN TRADE AND INVESTMENT, in: Studies in Trade and Investment - AGRICULTURAL TRADE - PLANTING THE SEEDS OF REGIONAL LIBERALIZATION IN ASIA, volume 60, pages 211-223, United Nations Economic and Social Commission for Asia and the Pacific (ESCAP).
    12. May, Daniel E., 2011. "Incentives of small countries to participate in a global free trade agreement in agriculture: a theoretical analysis," Economi­a Agraria (Revista Economia Agraria), Agrarian Economist Association (AEA), Chile, vol. 15, pages 1-7.

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