The strategic effects of subsidies on output and subsidies on investment differ substantially in dynamic models where a government's commitment ability is limited. Output subsidies remain effective even as the period of commitment vanishes, but investment subsidies may become completely...

Where consumers have imperfect information about specific firms' prices and lack information about the market, firms have informational market power. In general, improving the consumer's information about each firm's price will not necessarily lower average market price. We show, however, that...