Trade and Competition Policies for Oligopolies.

This paper presents a model of the interaction between trade and competition policies when a country has complete monopoly power. Behavior of firms and countries is modeled by a three-stage game with a subgame perfect equilibrium. The producing country is assumed to precommit its competition policy before the trade policy and output subgames. It will choose the competition policy that lowers the tariff faced by its firms at the margin. For a class of demand functions, a competitive industry and an export tax will give the producing country higher welfare than a cartel