Strategic trade policy under incomplete information

This paper examines equilibrium trade policies when firms have better infor mation than governments about the profitability of the industry. Contrary t o the intuition that the policymakers' lack of information should reduce th eir incentives to engage in strategic trade intervention, the analysis sugg ests that information asymmetries may increase trade policy distortions in equilibrium and ultimately worsen the "prisoner's dilemma" between governme nts.