This paper considers the case of a firm which faces the decision as to whether to invest in a cost-reducing technology with an uncertain return. Under certain conditions the removal of protection can facilitate this investment (a 'cold shower'). It is shown, in the case of Cournot competition, that a cold shower is more likely if a quota rather than a tariff is the protective instrument. It is also shown that a cold shower is more likely if the domestic firm is a Stackelberg leader rather than a Cournot competitior. A Cournot market structure is used to consider a reduction in the number of foreign firms (an increase in the domestic firms market power). It is argued that it is reasonable to believe that this will increase the likelihood of a cold shower occuring.
- cold shower,
Available at: http://works.bepress.com/neil_campbell/11/