Strategic product choice and equilibrium traps for less developed countries

Strategic trade considerations will influence product choice decisions of less developed countries (LDCs) when products with learning-augmented technologies are involved. With constant rates of time preference and learning economies in production, welfare-maximizing production strategies in the inte...

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Bibliographic Details
Published in:The journal of international trade & economic development 1993-06, Vol.2 (1), p.1-25
Main Author: Skeath, Susan E.
Format: Article
Language:English
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Summary:Strategic trade considerations will influence product choice decisions of less developed countries (LDCs) when products with learning-augmented technologies are involved. With constant rates of time preference and learning economies in production, welfare-maximizing production strategies in the international trade product choice game depend on relative levels of 'impatience' across countries, demand and learning parameters, and the other LDC's production strategy. Further, a low level growth 'trap' equilibrium for one LDC arises naturally from the choice theoretic context of the model and international coordination may be needed to obtain Pareto-efficient outcomes in some cases. Multiple LDC production of the good with learning benefits in production is generally discouraged by price and strategic interaction effects.
ISSN:0963-8199
1469-9559
DOI:10.1080/09638199300000001