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Public Firms in a Dynamic Third Market Model

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Author Info

  • Sofia B. S. D. Castro

    ()
    (Faculdade de Economia da Universidade do Porto)

  • António Brandão

    ()
    (CETE, Faculdade de Economia da Universidade do Porto)

Abstract

We set the third market model in a dynamic context to decide whether a country can achieve benefits by subsidizing a public rm's exports. We use calculus of variations with the constraint that the welfare is either maximized or grows at constant rate, reflecting the public concern of the firm. We conclude that a subsidy can be a good strategy for the country in some instances, even though only over a finite period of time. The duration of this period depends on the output strategy of the public firm as well as on exogenous factors.

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File URL: http://www.fep.up.pt/investigacao/workingpapers/wp103.pdf
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Bibliographic Info

Paper provided by Universidade do Porto, Faculdade de Economia do Porto in its series FEP Working Papers with number 103.

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Length: 16 pages
Date of creation: Jan 2001
Date of revision:
Handle: RePEc:por:fepwps:103

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Related research

Keywords: public firms; strategic trade policy; third market model; calculus of variations;

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References

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  1. de Fraja, Giovanni & Delbono, Flavio, 1989. "Alternative Strategies of a Public Enterprise in Oligopoly," Oxford Economic Papers, Oxford University Press, vol. 41(2), pages 302-11, April.
  2. James Brander & Paul Krugman, 1980. "A "Reciprocal Dumping" Model of International Trade," Working Papers 405, Queen's University, Department of Economics.
  3. James A. Brander, 1995. "Strategic Trade Policy," NBER Working Papers 5020, National Bureau of Economic Research, Inc.
  4. de Fraja, Giovanni & Delbono, Flavio, 1990. " Game Theoretic Models of Mixed Oligopoly," Journal of Economic Surveys, Wiley Blackwell, vol. 4(1), pages 1-17.
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Citations

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Cited by:
  1. Sandra Silva, 2004. "On evolutionary technological change and economic growth: Lakatos as a starting point for appraisal," FEP Working Papers 139, Universidade do Porto, Faculdade de Economia do Porto.
  2. Maria do Rosario Correia & Scott C. Linn & Andrew Marshall, 2004. "An Empirical Investigation of Debt Contract Design: The Determinants of the Choice of Debt Terms in Eurobond Issues," FEP Working Papers 148, Universidade do Porto, Faculdade de Economia do Porto.
  3. Rosa Forte, 2004. "The relationship between foreign direct investment and international trade. Substitution or complementarity? A survey," FEP Working Papers 140, Universidade do Porto, Faculdade de Economia do Porto.

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