Export subsidies boost domestic firms' market share, despite suboptimal global impact.
Countries use export subsidies to help their domestic firms compete in international markets. These subsidies change the game for firms by improving their market position and increasing profits. Even though the subsidizing country may lose out on trade terms, it can benefit from higher prices due to imperfect competition. This leads to a situation where countries use export subsidies to compete internationally, even though it may not be the best overall outcome.