Integrated Strategy and International Trade Disputes: The Kodak-Fujifilm Case

Integrated Strategy and International Trade Disputes: The Kodak-Fujifilm Case

1995Working Paper No. 1363

This paper examines the integration of market and nonmarket strategies in a setting involving market competition and international trade policy where governments serve as bargaining agents for firms. In the case modeled, the Eastman Kodak Company (Kodak) filed a Section 301 petition under U.S. trade law against practices of Fuji Photo Film Company (Fujifilm) in the Japanese distribution system that Kodak alleges constitute trade barriers. The model has three components. The market model characterizes the competition between Fujifilm and Kodak, incorporating characteristics descriptive of the demand andmarket structure in Japan. Enforcement on an international trade agreement focusing on practices in a distribution system are problematic, so the second model characterized the sustainability of concessions obtained through a trade agreement using a repeated game extension of the market model. The third model characterizes the bargaining between the U.S. and Japanese governments using the preferences induced by the market model and the limits on sustainable concessions characterized in the second model. The result is a model in which market and nonmarket strategies are integrated in a formal theory of the resolution of trade disputes and the subsequent effects on market competition.