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Purchase and rental subsidies in durable-oligopolies

Author

Listed:
  • Amagoia Sagasta

    () (Universidad del País Vasco)

  • José M. Usategui

    () (Universidad del País Vasco)

Abstract

We fully characterize the effects of per unit subsidies for the purchase and rental of durable goods, considering subsidies in the present and subsidies in the future, under imperfect competition. We show how welfare is affected by the simultaneous consideration of subsidies on renting and selling and how the effects of a change in one of those subsidies depend on its interaction with other subsidies. Among other results we explain why a subsidy in the future mitigates the commitment problem of producers when they sell and rent the durable good in the present, we find the region in the space of subsidies where a subsidy on sales in the present simultaneously increases the consumer, producer and total surpluses, and we show that the cost of subsidies may change in the opposite direction to the direction of change in any one subsidy.

Suggested Citation

  • Amagoia Sagasta & José M. Usategui, 2015. "Purchase and rental subsidies in durable-oligopolies," Hacienda Pública Española, IEF, vol. 213(2), pages 11-40, June.
  • Handle: RePEc:hpe:journl:y:2015:v:213:i:2:p:11-40
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    References listed on IDEAS

    as
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    4. Hodaka Morita & Michael Waldman, 2004. "Durable Goods, Monopoly Maintenance, and Time Inconsistency," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 13(2), pages 273-302, June.
    5. Goering, Gregory E & Boyce, John R, 1996. "Taxation and Market Power When Products Are Durable," Journal of Regulatory Economics, Springer, vol. 9(1), pages 83-94, January.
    6. Carlton, Dennis W & Gertner, Robert, 1989. "Market Power and Mergers in Durable-Good Industries," Journal of Law and Economics, University of Chicago Press, vol. 32(2), pages 203-226, October.
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    12. Coase, Ronald H, 1972. "Durability and Monopoly," Journal of Law and Economics, University of Chicago Press, vol. 15(1), pages 143-149, April.
    13. Kim, Jae-Cheol & Kim, Min-Young & Chun, Se-Hak, 2014. "Property tax and its effects on strategic behavior of leasing and selling for a durable-goods monopolist," International Review of Economics & Finance, Elsevier, vol. 29(C), pages 132-144.
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    More about this item

    Keywords

    subsidies; durable good; oligopoly; interaction between subsidies; cost of subsidies;

    JEL classification:

    • H32 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Firm
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • H22 - Public Economics - - Taxation, Subsidies, and Revenue - - - Incidence
    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies

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