High-Cost Domestic Joint Ventures and International Competition: Do Domestic Firms Gain?
AbstractThis paper develops the idea that when markets are imperfectly competitive, final producers may gain from a joint venture that produces part of their input requirements even though marginal cost exceeds the input's market price. Production by the joint venture lowers the market price of the input and this can raise profits sufficiently from final product sales to make the joint venture worthwhile. Also, use of a joint venture internalizes the positive externality from a lower input price. These results are motivated by a setting in which domestic firms are dependent on foreign oligopolistic suppliers for a key input.
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Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 4804.
Date of creation: Jul 1994
Date of revision:
Publication status: published as International Economic Review, Vol. 37, No. 2 (May 1996): 315-340.
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Other versions of this item:
- Spencer, Barbara J & Raubitschek, Ruth S, 1996. "High-Cost Domestic Joint Ventures and International Competition: Do Domestic Firms Gain?," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 37(2), pages 315-40, May.
- F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
- L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
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