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Strategic delegation and tariff protection with network externalities

Author

Listed:
  • Kangsik Choi

    (Pusan National University)

  • Ki-Dong Lee

    (Keimyung University)

Abstract

In the presence of network externalities, we examine the endogenous delegation structure in an import-competing market with import tariff under Bertrand competition. We show that (i) with strong network externalities, choosing delegation for home and foreign firms is a dominant strategy, which implies that the managerial delegation for output expansion is socially desirable; (ii) with weak (intermediate) network externalities, home firm chooses delegation (no delegation) but foreign firm chooses no delegation (delegation) in equilibrium; Thus, delegation to expand output of home and foreign firms is a more profitable choice than no delegation if the strength of network externalities is sufficiently large.

Suggested Citation

  • Kangsik Choi & Ki-Dong Lee, 2024. "Strategic delegation and tariff protection with network externalities," The Japanese Economic Review, Springer, vol. 75(1), pages 93-119, January.
    • Handle: RePEc:spr:jecrev:v:75:y:2024:i:1:d:10.1007_s42973-022-00118-x
    DOI: 10.1007/s42973-022-00118-x
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    More about this item

    Keywords

    Network externalities; Delegation; Import tariff; Bertrand;
    All these keywords.

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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