Explain When Strategic Export Subsidies Could Be Good for a Country

Essay

Explain when strategic export subsidies could be good for a country. Consider firm X belongs to country A and firm Y belongs to country B. Use a duopolistic market structure where both firms are dominant players in the world market. Discuss the differences between the game in which no subsidies are given and the game in which only one firm receives a subsidy. Create a hypothetical matrix in this context to aid your explanation.