The imposition of a commercial policy does not generally come as a complete surprise to the affected parties. Exporting firms have some information about the political climate in their export markets, and thus, can assess the probability of a trade re...
The imposition of a commercial policy does not generally come as a complete surprise to the affected parties. Exporting firms have some information about the political climate in their export markets, and thus, can assess the probability of a trade restraint being imposed. In the case of aquantity restriction, it is likely that the volume of trade allowed after the restraint is positively related to the volume of trade before the restraint. Thus, firms have an incentive to increase current production so that the losses they would incur in the event of a restriction are decreased. Such an incentive is referred to in the literature as the 'Yano effect'. This paper used an imperfectly competitive model to develop a different and more direct channel for the Yano effect and to determine its impact on intertemporal welfare.