Egli, Dominik; Westermann, Frank - In: Review of International Economics 12 (2004) 3, pp. 435-440
In a homogeneous-good duopoly game with a home and a foreign firm, which compete on prices, it has been shown that the optimal way to assist the domestic industry is by a production subsidy. The argument here is that the subsidy is used to keep potential competitive pressure on the foreign firm....