The Optimal Trade Intervention Timing under Informational Barriers and Imperfect Competition

The Optimal Trade Intervention Timing under Informational Barriers and Imperfect Competition

When a government intervenes to internalize externalities during the foreign market penetration process, the policy effectiveness differs depending on the policy intervention timing. Especially, when a firm is involved with strategic interaction with the competing foreign firm under informational barriers, the government intervention timing determinies the direction and the scale of policy effectiveness. This paper demonstrates that the government intervention as a first mover is welfare dominant to the case of non-intervention and intervention as a second mover. In addition, in the presence of distortionry cost of public fund, government intervention as a second mover deteriorates social welfare by the strategic price distortion of exportiong firms in addition to signaling purpose price distortion.