Export Subsidies and Timing of Decision-Making

This paper examines how the timing of decision-making affects the strategic trade policy. Extending the analysis on the strategic trade policy to the sequential-move game, I show some interesting results as follows: First, it is shown that when the governments decide the subsidies simultaneously before the Stackelberg competition, the leader firm loses its first-mover advantage. Second, it is shown that under the sequential-move game in which the government that can subsidize the leader firm decides the subsidy at first, the profit of the leader firm is less than that of the follower in the Stackelberg model