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Time-inconsistent Output Subsidy/Tax Policies in Free-entry Mixed Markets

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  • Chen, Jiaqi
  • Lee, Sang-ho
  • Muminov, Timur K.

Abstract

This study considers time-inconsistent output subsidy/tax policies in free-entry mixed markets under different competition modes. In a committed regime where the subsidy is determined before entry, the optimal rate is zero in either Cournot or Stackelberg game with private leadership, while it is negative in Stackelberg game with public leadership. In a non-committed regime where the subsidy is determined after entry, the optimal rate is always positive. We also show that private leadership is the best for social welfare regardless of the timing of subsidy policies, but public leadership might be equilibrium if the timing of entry decisions is endogenous.

Suggested Citation

  • Chen, Jiaqi & Lee, Sang-ho & Muminov, Timur K., 2019. "Time-inconsistent Output Subsidy/Tax Policies in Free-entry Mixed Markets," Hitotsubashi Journal of Economics, Hitotsubashi University, vol. 60(1), pages 61-77, June.
    • Handle: RePEc:hit:hitjec:v:60:y:2019:i:1:p:61-77
    DOI: 10.15057/30362
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    Cited by:

    1. Xu, Lili & Lee, Sang-Ho, 2020. "Strategic Relations between Corporate Social Responsibility and Partial Privatization Policy with Foreign Penetration," MPRA Paper 100770, University Library of Munich, Germany.
    2. Jiaqi Chen & Sang-Ho Lee & Timur K. Muminov, 2021. "Welfare-reducing discriminatory output subsidies with mixed ownership and R&D," Economics Bulletin, AccessEcon, vol. 41(3), pages 1592-1602.
    3. Cho, Sumi & Kim, Doori & Lee, Sang-Ho, 2021. "Free licensing strategy and ex post privatization in a mixed oligopoly," MPRA Paper 106126, University Library of Munich, Germany.
    4. Arturo Garcia & Mariel Leal & Sang-Ho Lee, 2021. "Competitive CSR in a strategic managerial delegation game with a multiproduct corporation," International Review of Economics, Springer;Happiness Economics and Interpersonal Relations (HEIRS), vol. 68(3), pages 301-330, September.
    5. Cho, Sumi & Kim, Doori & Lee, Sang-Ho, 2022. "Free licensing strategy and ex-post privatization policy with passive ownership," Economic Modelling, Elsevier, vol. 106(C).
    6. Lili Xu & Fanrui Su & Sang-Ho Lee, 2023. "Strategic corporate social responsibility and partial privatization policy with foreign penetration," The Japanese Economic Review, Springer, vol. 74(2), pages 251-278, April.
    7. Xu, Lili & Lee, Sang-Ho, 2021. "Strategic corporate social responsibility and tariff policies: The timing of commitments and policy implications," MPRA Paper 108499, University Library of Munich, Germany.

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    More about this item

    Keywords

    free-entry mixed market; committed policy; non-committed policy; output subsidy;
    All these keywords.

    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • H42 - Public Economics - - Publicly Provided Goods - - - Publicly Provided Private Goods
    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General

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