Governments Can Boost Exports by Taxing or Subsidizing Firms Based on Market Power
In a study about trade policies in related industries, researchers explored how various factors influence the best export strategies for countries with firms involved in creating products for foreign markets. They considered things like how companies guess each other's moves, how powerful different companies are, and how unique their products are. The findings show that the best trade policy depends on these factors - if the company supplying materials has a lot of control and the downstream companies are not competing much, it's better for the country to tax the companies. But if the material supplier has less power and the downstream companies are highly competitive, giving them a subsidy is more beneficial. So, different situations call for different trade policies to help businesses thrive in the global market.