EXPORT SUBSIDIES AND OLIGOPOLY WITH SWITCHING COSTS

I examine export policy using a two-period model of oligopolistic comp etition with switching costs. A switching costs model captures the ide a that market share in one period affects profits and welfare in futur e periods. If consumers are impatient, firms and governments are patie nt, and switching costs are significant, then governments subsidize fi rst-period exports and tax second-period exports, otherwise government s tax exports in both periods. Although governments may subsidize firs t-period exports, each country is made worse off when both countries s ubsidize. In addition, firms 'dump' (p < mc) under conditions similar to those required for export subsidies.