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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

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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Bibliographic Info

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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  1. Calmfors, L., 1992. "Lessons from the Macroeconomic Experience of Sweden," Papers 522, Stockholm - International Economic Studies.
  2. Decressin, Jörg & Fatás, Antonio, 1994. "Regional Labour Market Dynamics in Europe," CEPR Discussion Papers 1085, C.E.P.R. Discussion Papers.
  3. Olivier Jean Blanchard & Lawrence F. Katz, 1992. "Regional Evolutions," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 23(1), pages 1-76.
  4. Per-Anders Edin & Robert Topel, 1997. "Wage Policy and Restructuring: The Swedish Labor Market since 1960," NBER Chapters, in: The Welfare State in Transition: Reforming the Swedish Model, pages 155-202 National Bureau of Economic Research, Inc.
  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.
  6. Ackum, Susanne, 1991. " Youth Unemployment, Labor Market Programs and Subsequent Earnings," Scandinavian Journal of Economics, Wiley Blackwell, vol. 93(4), pages 531-43.
  7. Lindbeck, A., 1990. "The Swedish Experience," Papers 482, Stockholm - International Economic Studies.
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Cited by:
  1. Chen, Yongmin & Ishikawa, Jota & Yu, Zhihao, 2001. "Trade Liberalization and Strategic Outsourcing," Discussion Papers 2001-04, Graduate School of Economics, Hitotsubashi University.
  2. Barbara J. Spencer & Larry D. Qiu, 2000. "Keiretsu and Relationship-Specific Investment: A Barrier to Trade?," NBER Working Papers 7572, National Bureau of Economic Research, Inc.
  3. Long, Ngo Van & Soubeyran, Antoine, 2001. "Cost Manipulation Games in Oligopoly, with Costs of Manipulating," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 42(2), pages 505-33, May.
  4. repec:ebl:ecbull:v:6:y:2008:i:8:p:1-7 is not listed on IDEAS
  5. Morasch, Karl, 2000. "Strategic alliances: a substitute for strategic trade policy?," Journal of International Economics, Elsevier, vol. 52(1), pages 37-67, October.

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