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Strategic managerial delegation and industrial policy competition in vertically-related markets

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  • Chang, Winston W.
  • Chen, Fang-yueh

Abstract

In a successive duopoly in which all firms are private except the home upstream SOE, we show that if the SOE is less efficient than its foreign rival, the home managerial delegation policy will force the SOE to price below marginal cost; otherwise, it will resort to marginal cost pricing to force out its rival. Both upstream firms will not be pure profit maximizers and will compete in profit and sales. The home government will subsidize its downstream firm if the market is large or the foreign rival's output is small. The foreign government will always subsidize its downstream firm.

Suggested Citation

  • Chang, Winston W. & Chen, Fang-yueh, 2016. "Strategic managerial delegation and industrial policy competition in vertically-related markets," International Review of Economics & Finance, Elsevier, vol. 43(C), pages 429-442.
  • Handle: RePEc:eee:reveco:v:43:y:2016:i:c:p:429-442
    DOI: 10.1016/j.iref.2016.01.006
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    References listed on IDEAS

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    More about this item

    Keywords

    Vertically related markets; International mixed duopoly; Managerial delegation; Production subsidy;

    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • H44 - Public Economics - - Publicly Provided Goods - - - Publicly Provided Goods: Mixed Markets
    • L21 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Business Objectives of the Firm
    • L30 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - General

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