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Strategic Commercial Policy Revisited: A Supply-Function Equilibrium Model

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  • Laussel, Didier

Abstract

The author considers a model in which one firm in each of two countries produces a homogeneous good and sells it exclusively to a third country. Each firm simultaneously selects a supply function before a demand shock occurs. The model assumes that the home government can precommit to a subsidy function. The optimal marginal subsidy rate is shown to decrease with domestic exports. This induces the firms to select steeper supply functions, thereby softening competition. The strategic complementarity between supply functions' slopes is the key to these results. Copyright 1992 by American Economic Association.

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Bibliographic Info

Article provided by American Economic Association in its journal American Economic Review.

Volume (Year): 82 (1992)
Issue (Month): 1 (March)
Pages: 84-99

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Handle: RePEc:aea:aecrev:v:82:y:1992:i:1:p:84-99

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Cited by:
  1. Xavier Vives, 2009. "Strategic Supply Function Competition with Private Information," CESifo Working Paper Series 2856, CESifo Group Munich.
  2. Holmberg, Pär & Philpott, Andrew, 2012. "Supply Function Equilibria in Networks with Transport Constraints," Working Paper Series 945, Research Institute of Industrial Economics.
  3. Espinosa Alejos, María Paz & Ciarreta Antuñano, Aitor, 2005. "A Supply Function Competition Model for the Spanish Wholesale Electricity Market," DFAEII Working Papers 2005-18, University of the Basque Country - Department of Foundations of Economic Analysis II.
  4. Adilov, Nodir, 2012. "Strategic use of forward contracts and capacity constraints," International Journal of Industrial Organization, Elsevier, vol. 30(2), pages 164-173.
  5. Massimo Motta & Michele Polo, . "Product differentiation and endogenous mode of competition," Working Papers 134, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
  6. Mustafa Caglayan & Murat Usman, 2003. "Incompletely Informed Policymakers and Trade Policy in Oligopolistic Industries," Research Papers 2003_06, University of Liverpool Management School.
  7. Abolmassov Aleksandr & Kolodin Denis, 2003. "Structural changes in Russian electricity market," EERC Working Paper Series 01-016e, EERC Research Network, Russia and CIS.
  8. Bourjade, Sylvain, 2009. "Strategic price discounting and rationing in uniform price auctions," Economics Letters, Elsevier, vol. 105(1), pages 23-27, October.
  9. Aitor Ciarreta & María Espinosa, 2010. "Market power in the Spanish electricity auction," Journal of Regulatory Economics, Springer, vol. 37(1), pages 42-69, February.
  10. Michele Polo & Piero Tedeschi, . "Equilibrium and Renegotiation in Delegation Games," Working Papers 116, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
  11. Aitor Ciarreta & Carlos Gutiérrez-Hita, 2012. "Collusive behaviour under cost asymmetries when firms compete in supply functions," Journal of Economics, Springer, vol. 106(3), pages 195-219, July.
  12. Fernando Mesa, 2009. "Piecemeal Oligopoly, Exchange Rate Uncertainty, and Trade Policy," REVISTA DE ECONOMÍA DEL ROSARIO, UNIVERSIDAD DEL ROSARIO.
  13. Bulut, Harun & Koray, Semih, 2008. "Competition and Regulation Via Supply and Demand Functions in Oligopolistic-Oligopsonistic Markets," Staff General Research Papers 12930, Iowa State University, Department of Economics.

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