This paper aims at showing that a strategically delayed export subsidy can help improve national welfare more efficiently. Usually, a government attempts to subsidize domestic exporting firms because the subsidized exporting firms are believed to help enlarge national welfare by gaining more profits from an international market. When governments compete to subsidize domestic exporting firms for enlarging national welfare, there can exist a 'free-riding' situation in which the national welfare of a country can be enhanced without subsidization. This is because the subsidy competition between governments can generate more demand for certain types of goods. Thus, it can happen that a government might intentionally wait until another government's subsidy actually increases demand. That is, a government can choose a behavior of strategic delay. Theoretically, this paper explains how a strategic delay can take place in the field of trade policy.
Abstract
Ⅰ. Introduction
Ⅱ. Subsidy and Opportunity Cost
Ⅲ. Basic Model
Ⅳ. Sequential Move
Ⅴ. National Welfare and Strategic Delay
Ⅵ. Concluding Remarks
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