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High-Cost Domestic Joint Ventures and International Competition: Do Domestic Firms Gain?

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Ruth R. Raubitschek
Barbara J. Spencer

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Abstract

This 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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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 4804.

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Date of creation: Jul 1994
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Publication status: published as International Economic Review, Vol. 37, No. 2 (May 1996): 315-340.
Handle: RePEc:nbr:nberwo:4804

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Find related papers by JEL classification:
F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies
L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

  1. Decressin, Jorg & Fatas, Antonio, 1995. "Regional labor market dynamics in Europe," European Economic Review, Elsevier, vol. 39(9), pages 1627-1655, December. [Downloadable!] (restricted)
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  2. Lindbeck, A., 1990. "The Swedish Experience," Papers 482, Stockholm - International Economic Studies.
  3. Ackum, Susanne, 1991. " Youth Unemployment, Labor Market Programs and Subsequent Earnings," Scandinavian Journal of Economics, Blackwell Publishing, vol. 93(4), pages 531-43.
  4. Calmfors, L., 1992. "Lessons from the Macroeconomic Experience of Sweden," Papers 522, Stockholm - International Economic Studies.
  5. Bean, C R & Layard, P R G & Nickell, S J, 1986. "The Rise in Unemployment: A Multi-country Study," Economica, London School of Economics and Political Science, vol. 53(210(S)), pages S1-22, Supplemen. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Yongmin Chen & Jota Ishikawa & Zhihao Yu, 2002. "Trade Liberalization and Strategic Outsourcing," Carleton Economic Papers 02-12, Carleton University, Department of Economics. [Downloadable!]
    Other versions:
  2. Ngo Van Long & Antoine Soubeyran, 1999. "Cost Manipulation Games in Oligopoly, with Costs of Manipulating," CIRANO Working Papers 99s-13, CIRANO. [Downloadable!]
    Other versions:
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