Score contribution per author:
α: calibrated so average coauthorship-adjusted count equals average raw count
In an environment in which home firm costs are private information, home firm output can signal these costs to a foreign competitor and a home policymaker. High-cost home firms have an incentive to misrepresent themselves as low-cost. This is understood by the foreign firm and the home policymaker and results in the first-period optimal per-unit output subsidy to the home firm being less than it would be if home firm output was not a signal of home firm costs. These results are extended to the case of simultaneous signaling and signaling through price. Copyright 1998 by Blackwell Publishing Ltd.