Explain When Strategic Export Subsidies Could Be Good for a Country

question 39

Essay

Explain when strategic export subsidies could be good for a country. Consider firm X belongs to country A and firm Y belongs to country B. Use a duopolistic market structure where both firms are dominant players in the world market. Discuss the differences between the game in which no subsidies are given and the game in which only one firm receives a subsidy. Create a hypothetical matrix in this context to aid your explanation.

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Definitions:

Clayton Act

A U.S. antitrust law, passed in 1914, aimed at increasing competition by prohibiting certain actions that lead to anti-competitiveness.

Sherman Act

A foundational antitrust law in the United States designed to prevent monopolistic practices and promote competition.

Competition

The rivalry among businesses to attract customers and gain market share, driving innovation, efficiency, and lower prices.

Service Industries

Sectors of the economy that provide intangible goods or services, such as healthcare, education, and finance.