Optimal Policies with Strategic Distortions

41 Pages Posted: 19 Jun 2004 Last revised: 30 May 2021

See all articles by Kala Krishna

Kala Krishna

Pennsylvania State University - Department of Economics; National Bureau of Economic Research (NBER)

Marie C. Thursby

Georgia Institute of Technology - Strategic Management Area; National Bureau of Economic Research (NBER)

Date Written: March 1988

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.

Suggested Citation

Krishna, Kala and Thursby, Marie C., Optimal Policies with Strategic Distortions (March 1988). NBER Working Paper No. w2527, Available at SSRN: https://ssrn.com/abstract=425560

Kala Krishna

Pennsylvania State University - Department of Economics ( email )

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Marie C. Thursby (Contact Author)

Georgia Institute of Technology - Strategic Management Area ( email )

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National Bureau of Economic Research (NBER)

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