Export subsidy and antitrust policies in oligopoly with and without threat of entry (Q1825106)

We construct a model of oligopoly with foreign competitors constituting the competitive fringe of a domestic market which is dominated by domestic oligopoly. It is shown that (1) the export subsidy is likely to raise the welfare of the importing country if the share of imports is suficiently large. The effect of the export subsidy on the welfare of the exporting country becomes ambiguous for it has the effect to reduce the exporting country's costs of bearing risk involved in international trade, (2) the likelihood of the improvement in the performance of a market in the importing country by its own antitrust policy is increased as the share of imports increases, but it reduces the welfare of the exporting country unless exports are subsidized, and (3) if entry is free, then the export subsidy affects neither price nor welfare of the importing country but may well worsen the welfare of the exporting country.