ABSTRACT
Researchers have already discussed various aspects of strategic trade policies. For a representative sample, one may look at Brander and Spencer (1984, 1985), Spencer and Brander (1983), Dixit (1984), Lee (1990), Dick (1993), Neary (1994) and Das (1997). However, the previous contributions have paid little attention to an important issue of integrated equity markets. The previous works, except Lee (1990) and Dick (1993), have considered that the residents of a country own 100 per cent share of that country’s firm. However, in today’s world, this assumption helps to focus on trade policies for a subset of firms. With the emergence of integrated equity markets and high percentage of foreign equity shares in domestic firms, it is important to look at a situation where the residents of that particular country do not own 100 per cent share of a firm. Hence, it is important to examine the implications of trade policies of different countries when people of different countries hold equity shares in a firm.
