Procompetitive Market Access

Kala Krishna (), Suddhasatwa Roy and Marie Thursby

No 6184, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: The view that U.S. businesses are being unfairly hurt by barriers to access in foreign markets has raised demands for market access requirements (MARs) from within U.S. industry and government alike. We show that, contrary to the prevailing wisdom of the recent literature, MARs can be implemented in a procompetitive manner. The basic idea is that the requirement must be implemented in a way that provides the right incentives for increasing aggregate output or lowering prices. We provide two examples to illustrate this point. In the context of a Cournot duopoly, we show that an implementation scheme in which the U.S. firm receives a pre-announced subsidy if the market share target is met leads to increased aggregate output. In a second example, we show that a MAR on an imported intermediate input can lead not only to increased imports of the intermediate good, but also to increased output in the final good market using the input. The intuition is that increasing output of the final good helps to make the MAR less binding and this reduces the marginal cost of production in the final good market. Thus our results buttress the point made in Krishna, Roy and Thursby (1997) that the effects of MARs depend crucially on the details of their implementation.

JEL-codes: F13 (search for similar items in EconPapers)
Date: 1997-09
Note: ITI
References: Add references at CitEc
Citations: View citations in EconPapers (2)

Published as Business and Economics for the 21st Century, Vol.1 (1997): 333-342.

Downloads: (external link)
http://www.nber.org/papers/w6184.pdf (application/pdf)

Related works:
Working Paper: Procompetitive Market Access (1997)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:nbr:nberwo:6184

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w6184

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().