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¥¿¥¤¥È¥ë¡§Optimal transport and industrial policy in the presence of restricted geographical condition

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Arguments for strategic trade intervention with Bertrand duopolists are reconsidered in a model where a landlocked firm competes with a coastal firm in the third market. Facing a geographical disadvantage, the landlocked has an incentive to investing and subsidizing a transport cost-reducing R&D. We assume that the coastal government imposes a toll fee on the landlocked firm for the movement of goods through its region. As a result, we find that both the landlocked R&D subsidy and the coastal toll fee work as strategic policies and that the optimal levels for these are both positive.
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