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Uniform Subsidy Reductions in International Oligopoly

Author

Listed:
  • Sandin, Rickard

    (Department of Economics)

Abstract

This paper studies the effect of production subsidies used as strategic instruments by two rivalling countries whose firms differ in production efficiency. In particular, it examines the welfare effects of a uniform subsidy reduction from the Cournot-Nash equilibrium under different assumptions regarding technology and taste. It is found that the net exporter (usually the efficient country) gains while the net importer (usually the inefficient country) loses from a uniform subsidy reduction. Results show that a non-linear demand function or marginal cost functions with different slopes across countries is necessary to obtain an increase in total welfare.

Suggested Citation

  • Sandin, Rickard, 1996. "Uniform Subsidy Reductions in International Oligopoly," SSE/EFI Working Paper Series in Economics and Finance 141, Stockholm School of Economics.
  • Handle: RePEc:hhs:hastef:0141
    as

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    References listed on IDEAS

    as
    1. Mata, Jose & Portugal, Pedro, 1994. "Life Duration of New Firms," Journal of Industrial Economics, Wiley Blackwell, vol. 42(3), pages 227-245, September.
    2. Heckman, James & Singer, Burton, 1984. "A Method for Minimizing the Impact of Distributional Assumptions in Econometric Models for Duration Data," Econometrica, Econometric Society, vol. 52(2), pages 271-320, March.
    3. Kiefer, Nicholas M, 1988. "Economic Duration Data and Hazard Functions," Journal of Economic Literature, American Economic Association, vol. 26(2), pages 646-679, June.
    4. Mata, Jose & Portugal, Pedro & Guimaraes, Paulo, 1995. "The survival of new plants: Start-up conditions and post-entry evolution," International Journal of Industrial Organization, Elsevier, vol. 13(4), pages 459-481, December.
    5. Geroski, P. A., 1995. "What do we know about entry?," International Journal of Industrial Organization, Elsevier, vol. 13(4), pages 421-440, December.
    6. Raubitschek, Ruth S., 1988. "Hitting the jackpot: Product proliferation by multiproduct firms under uncertainty," International Journal of Industrial Organization, Elsevier, vol. 6(4), pages 469-488.
    7. Jovanovic, Boyan, 1982. "Selection and the Evolution of Industry," Econometrica, Econometric Society, vol. 50(3), pages 649-670, May.
    8. Audretsch, David B & Mahmood, Talat, 1995. "New Firm Survival: New Results Using a Hazard Function," The Review of Economics and Statistics, MIT Press, vol. 77(1), pages 97-103, February.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Cournot oligopoly; heterogeneous countries; production subsidies;

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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