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A Theory of Favoritism under International Oligopoly

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  • Ngo Van Long
  • Antoine Soubeyran

Abstract

This paper offers an explanation of the fact that some foreign firms are favored at the expense of others, and characterizes the distribution of favors in terms of the cost parameters of firms, and a preference parameter in the government's objective function. We present a model where favors must be bought: they come from competing contributions. This model is compared with a benchmark model with a benevolent government. We show how the distribution of favors in the favor-seeking model deviates from the distribution that would be obtained if the government were really benevolent. On offre une explication du fait que certaines firmes étrangères sont mieux traitées que d'autres. On caractérise la distribution des faveurs qui sont associées à l'asymétrie des coûts. On modélise la situation où les faveurs sont achetées. On compare ce modèle de la recherche des rentes au modèle standard où le gouvernement maximise le bien-être social. On caractérise la différence entre les distributions des faveurs de ces deux modèles.

Suggested Citation

  • Ngo Van Long & Antoine Soubeyran, 2003. "A Theory of Favoritism under International Oligopoly," CIRANO Working Papers 2003s-15, CIRANO.
  • Handle: RePEc:cir:cirwor:2003s-15
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    File URL: http://www.cirano.qc.ca/files/publications/2003s-15.pdf
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    References listed on IDEAS

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    1. Ngo, Van Long & Soubeyran, Antoine, 1997. "Cost heterogeneity, industry concentration and strategic trade policies," Journal of International Economics, Elsevier, vol. 43(1-2), pages 207-220, August.
    2. Grossman, Gene M & Helpman, Elhanan, 1994. "Protection for Sale," American Economic Review, American Economic Association, vol. 84(4), pages 833-850, September.
    3. Long, Ngo Van & Soubeyran, Antoine, 2001. "International Cross-Ownership and Strategic Trade Policies," Review of International Economics, Wiley Blackwell, vol. 9(1), pages 1-15, February.
    4. Neary, J. Peter, 1994. "Cost asymmetries in international subsidy games: Should governments help winners or losers?," Journal of International Economics, Elsevier, vol. 37(3-4), pages 197-218, November.
    5. David R. Collie, 2006. "Tariffs And Subsidies Under Asymmetric Oligopoly: Ad Valorem Versus Specific Instruments," Manchester School, University of Manchester, vol. 74(3), pages 314-333, June.
    6. Leahy, D. & Montagna, C., 1997. "Strategic Trade Policy With Domestic Cost Asymmetries," Papers 97/27, College Dublin, Department of Political Economy-.
    7. Long, Ngo Van & Soubeyran, Antoine, 2001. "Cost Manipulation Games in Oligopoly, with Costs of Manipulating," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 42(2), pages 505-533, May.
    8. Dixit, Avinash K, 1986. "Comparative Statics for Oligopoly," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 27(1), pages 107-122, February.
    9. Hillman, Arye L & Ursprung, Heinrich W, 1988. "Domestic Politics, Foreign Interests, and International Trade Policy," American Economic Review, American Economic Association, vol. 78(4), pages 719-745, September.
    10. Dermot Leahy & Catia Montagna, 1998. "Targeted Strategic Trade Policy with Domestic Cost Heterogeneity," Dundee Discussion Papers in Economics 100, Economic Studies, University of Dundee.
    11. B. Douglas Bernheim & Michael D. Whinston, 1986. "Menu Auctions, Resource Allocation, and Economic Influence," The Quarterly Journal of Economics, Oxford University Press, vol. 101(1), pages 1-31.
    12. Long, Ngo Van & Soubeyran, Antoine, 1996. "Lobbying for protection by heterogeneous firms," European Journal of Political Economy, Elsevier, vol. 12(1), pages 19-32, April.
    13. Hillman, Arye L. & Van Long, Ngo & Soubeyran, Antoine, 2001. "Protection, lobbying, and market structure," Journal of International Economics, Elsevier, vol. 54(2), pages 383-409, August.
    14. Van Long, Ngo & Soubeyran, Antoine, 2000. "Existence and uniqueness of Cournot equilibrium: a contraction mapping approach," Economics Letters, Elsevier, vol. 67(3), pages 345-348, June.
    15. Van Long, N. & Soubeyran, A., 1997. "Cost Manipulation in an Asymmetric Oligopoly: The Taxation Problem," ASSET - Instituto De Economia Publica 173, ASSET (Association of Southern European Economic Theorists).
    16. Avinash Dixit, 1996. "Special-Interest Lobbying and Endogenous Commodity Taxation," Eastern Economic Journal, Eastern Economic Association, vol. 22(4), pages 375-388, Fall.
    17. Bergstrom, Theodore C. & Varian, Hal R., 1985. "Two remarks on Cournot equilibria," Economics Letters, Elsevier, vol. 19(1), pages 5-8.
    18. Rodrik, Dani, 1989. "Optimal trade taxes for a large country with non-atomistic firms," Journal of International Economics, Elsevier, vol. 26(1-2), pages 157-167, February.
    19. Van Long, Ngo & Vousden, Neil, 1991. "Protectionist responses and declining industries," Journal of International Economics, Elsevier, vol. 30(1-2), pages 87-103, February.
    20. Bergstrom, Theodore & Blume, Lawrence & Varian, Hal, 1986. "On the private provision of public goods," Journal of Public Economics, Elsevier, vol. 29(1), pages 25-49, February.
    21. Collie, David, 1993. "Strategic trade policy under asymmetric oligopoly," European Journal of Political Economy, Elsevier, vol. 9(2), pages 275-280, May.
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    Cited by:

    1. Ngo Van Long & Antoine Soubeyran, 2007. "A Theory of Favoritism in an International Oligopoly," Review of International Economics, Wiley Blackwell, vol. 15(3), pages 481-498, August.

    More about this item

    Keywords

    Favoritism; Asymmetric Oligopoly; Cost Manipulation; Discriminatory Taxes; Favoritisme; oligopole asymétrique; manipulation de coûts; taxes discriminatoires;

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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