The New Palgrave Dictionary of Economics

2018 Edition
| Editors: Macmillan Publishers Ltd

Strategic Trade Policy

  • Barbara J. Spencer
  • James A. Brander
Reference work entry


Strategic trade policy refers to trade policy that affects the outcome of strategic interactions between firms in an actual or potential international oligopoly. A main idea is that trade policies can raise domestic welfare by shifting profits from foreign to domestic firms. A well-known application is the strategic use of export subsidies, but import tariffs as well as subsidies to R&D or investment for firms facing global competition can also have strategic effects. Since intervention by more than one government can lead to a Prisoner’s Dilemma, the theory emphasizes the importance of trade agreements that restrict such interventions.


Cournot competition Cournot oligopoly Cournot–Nash equilibrium Cramer’s rule Economies of scale Export subsidy Game theory International oligopoly International trade (theory) International trade policy Intra-firm trade Intra-industry trade Krugman, P. Monopolistic competition Multinational corporations Oligopoly theory Optimum tariff Prisoner’s Dilemma Profit shifting Research and development Ricardo, D. Strategic trade policy Technology transfer 

JEL Classifications

F1 L1 
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Copyright information

© Macmillan Publishers Ltd. 2018

Authors and Affiliations

  • Barbara J. Spencer
    • 1
  • James A. Brander
    • 1
  1. 1.