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Firms Controlled by Owners and Managerial Firms: The 'Strategic' Trade Policy Game Revisited

Author

Listed:
  • Fanti, Luciano

    (Department of Economics and Management, University of Pisa, Italy)

  • Buccella, Domenico

    (Kozminsky University, Warsaw, Poland)

Abstract

This paper re-examines the strategic trade policy issue by considering a bargaining process over managerial contracts and different firms’ organizational structures; that is, either family ownership or atomistic shareholders whose board of directors delegate output choice to managers keep control over the firm. We show that, in contrast to the traditional results, a plethora of Nash equilibria emerges and the implementation of trade policies in both countries may be efficient (i.e. national social welfares are higher than under free trade) in the presence of a bargaining process in a sales delegation game. Such equilibria depend on the manager's bargaining power as well as the degree of product competition. The paper’s findings suggest that trade policy-makers should also take into account the ownership structure and the corresponding organizational form of the exporting firms. Imprese controllate dai proprietari e imprese manageriali: una rivisitazione del gioco della politica commerciale strategica Questo articolo riesamina il tema della politica commerciale strategica di due paesi esportatori in un terzo mercato in presenza di diverse strutture organizzative delle imprese, considerando, da un lato, imprese in cui il controllo è esercitato dai membri di una famiglia e, dall’altro lato, imprese con azionariato diffuso i cui consigli di amministrazione delegano la scelta dei livelli di produzione a manager, con un processo di negoziazione fra proprietari e manager sui contratti di quest’ultimi. Contrariamente ai risultati tradizionali, si dimostra che in presenza di un processo di negoziazione in un gioco di delega manageriale delle scelte produttive emerge una pletora di equilibri di Nash rispetto alle scelte di intervenire con politiche commerciali oppure di ‘laissez faire’ e l'attuazione delle politiche commerciali in entrambi i paesi può essere efficiente (cioè, i livelli di benessere sociale nazionali sono più alti di quelli in regime di libero commercio). Tali equilibri dipendono sia dal potere contrattuale del manager che dal grado di concorrenza tra prodotti. I risultati del lavoro suggeriscono che, in caso di intervento, i decisori delle politiche commerciali debbano prendere in considerazione sia la struttura di proprietà che la corrispondente forma organizzativa delle imprese esportatrici.

Suggested Citation

  • Fanti, Luciano & Buccella, Domenico, 2018. "Firms Controlled by Owners and Managerial Firms: The 'Strategic' Trade Policy Game Revisited," Economia Internazionale / International Economics, Camera di Commercio Industria Artigianato Agricoltura di Genova, vol. 71(1), pages 51-72.
  • Handle: RePEc:ris:ecoint:0820
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    References listed on IDEAS

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    More about this item

    Keywords

    Export Subsidy/Tax; Prisoner’s Dilemma; Managerial Delegation; Owner-Manager Bargaining; Cournot Duopoly;
    All these keywords.

    JEL classification:

    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • J51 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Trade Unions: Objectives, Structure, and Effects
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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