Free trade versus strategic trade as a choice between two ‘second best’ policies: A symmetric versus asymmetric information analysis

Abstract

We analyse the following policy dilemma: strategic trade policy versus free trade when the domestic government is bound to intervene only after the domestic firm's strategic variable in the form of R&D investment is chosen, and when the information can be either symmetric or asymmetric. The novel feature of our model is that the information asymmetry stems from the assumption that the government may not a priori know the true mode of competition. The intervention in the above set-up allows the domestic firm to manipulate the domestic government and results in a socially inefficient choice of the strategic variable. However, commitment to free trade leads to forgoing the benefits from profit-shifting. Yet, from the social point of view, free trade may be optimal even under the assumption of symmetric information. Due to costly signalling, this result is reinforced in the case of asymmetric information.     

Stackelberg leadership with product differentiation and endogenous entry: some comparative static and limiting results

Allowing for endogenous entry in the traditional Stackelberg setup with product differentiation, leads to reverting of the standard comparative static and limiting results. Unlike in the standard Stackelberg setup with barriers to entry, the leader??s profit increases when the differentiation becomes lower. The reason is that competition becomes tougher when products become more alike, and consequently, fewer firms enter in equilibrium. On the other hand, increasing product differentiation towards its limit results in number of entrants tending to infinity and for very large market, the profit of the leader approaches zero. Thus market structure approaches monopolistic competition, rather than the standard monopoly outcome that occurs with exogenous number of followers.     

Emotionally Based Strategic Communications in the Process of Societal Deradicalization

Pervasiveness of extreme negative emotions, especially anger, hatred and humiliation, as well as negative appraisal style, has a significant impact on the process of societal radicalization. Dominance of such emotions, and the corresponding appraisal style, very often threaten societal security. Emotionally Based Strategic Communications (EBSC), proposed in this article, can be used as a communications strategy for mitigating negative and promoting positive emotions within societal groups exposed to radicalization processes. Essentially, EBSC as mechanisms of positive emotional regulation strategy are based on reshaping the (re)appraisal style of radicalized groups. Grounded in the appraisal theories of emotions, EBSC are entirely non-coercive, and applicable to a wide variety of groups. Such communications strategies are also extendible to Internet-based social media networks, opening new possibilities in deradicalization processes using sentiment analysis, cognitive computing, botnets and other ICT-based methods and techniques.