Optimal policies with strategic distortions

Kala Krishna, Marie Thursby

Research output: Contribution to journalArticlepeer-review

16 Scopus citations


This paper analyzes the jointly optimal levels of a variety of policy instruments when markets are imperfectly competitive. A targeting principle to identify optimal policies under imperfect competition is derived using the concept of a 'strategic distortion'. This allows us to interpret when trade policy is first best and links the literature on optimal policies with imperfect competition to the standard targeting literature. We show that optimal tax/subsidy policy depends crucially on the presence of other regulations and assumptions about market segmentation.

Original languageEnglish (US)
Pages (from-to)291-308
Number of pages18
JournalJournal of International Economics
Issue number3-4
StatePublished - Nov 1991

All Science Journal Classification (ASJC) codes

  • Finance
  • Economics and Econometrics


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