Indicate whether the strategic effects of the following competitive moves are likely to be positive (beneficial to the firm making them) or negative (harmful to the firm making them).

(a) Two horizontally differentiated producers of diesel railroad engines—

one located in the United States and the other in Europe—compete in the European market as Bertrand price competitors. The U.S. manufacturer lobbies the U.S. government to give it an export subsidy, the amount of which is directly proportional to the amount of output the firm sells in the European market.

(b) A Cournot duopolist issues new debt to repurchase shares of its stock. The new debt issue will preclude the firm raising additional debt in the foreseeable future, and is expected to constrain the firm from modernizing existing production facilities.