Private Information and Optimal Infant Industry Protection

Raymond G. Riezman; B. Ravikumar; Yuzhe Zhang

doi:10.2139/ssrn.5371394

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Private Information and Optimal Infant Industry Protection

Working paper

Open access

Private Information and Optimal Infant Industry Protection

Raymond G. Riezman, B. Ravikumar and Yuzhe Zhang

SSRN

07/30/2025

DOI: 10.2139/ssrn.5371394

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Abstract

We study infant industry protection using a dynamic model in which the industry's cost is initially higher than that of foreign competitors. The industry can stochastically lower its cost via learning by doing. Whether the industry has transitioned to low cost is private information. Using a mechanism-design approach, we solve for the optimal protection policy that induces the industry to reveal its true cost. We show that (i) optimal protection, measured by infant industry output, declines over time and is less than that under public information and (ii) eventual viability of the infant industry is not necessary for optimal protection under private information.

Details

Title: Subtitle: Private Information and Optimal Infant Industry Protection
Creators: Raymond G. Riezman
B. Ravikumar
Yuzhe Zhang
Resource Type: Working paper
DOI: 10.2139/ssrn.5371394
Publisher: SSRN
Number of pages: 36 pages
Language: English
Date posted: 07/30/2025
Academic Unit: Economics
Record Identifier: 9984963191502771

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