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The State Aid Game

Author

Listed:
  • Stephen Martin

    () (Purdue University)

  • Paola Valbonesi

    () (University of Padua)

Abstract

We present a model of the impact of state aid on equilibrium market structure and on market performance in an integrating market when the process of integration is driven by consumer inertia. In a partial equilibrium model, it is an equilibrium for governments to grant state aid, even though this reduces common market welfare.

Suggested Citation

  • Stephen Martin & Paola Valbonesi, 2006. "The State Aid Game," "Marco Fanno" Working Papers 0024, Dipartimento di Scienze Economiche "Marco Fanno".
  • Handle: RePEc:pad:wpaper:0024
    as

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    File URL: http://economia.unipd.it/sites/decon.unipd.it/files/20060024.pdf
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    References listed on IDEAS

    as
    1. Martin, Stephen, 2001. "Industrial Organization: A European Perspective," OUP Catalogue, Oxford University Press, number 9780198297284.
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    5. 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.
    6. Waterson, Michael, 2003. "The role of consumers in competition and competition policy," International Journal of Industrial Organization, Elsevier, vol. 21(2), pages 129-150, February.
    7. Hay, Donald A & Liu, Guy S, 1997. "The Efficiency of Firms: What Difference Does Competition Make?," Economic Journal, Royal Economic Society, vol. 107(442), pages 597-617, May.
    8. Roberts, Mark J. & Supina, Dylan, 1996. "Output price, markups, and producer size," European Economic Review, Elsevier, vol. 40(3-5), pages 909-921, April.
    9. Nickell, Stephen J, 1996. "Competition and Corporate Performance," Journal of Political Economy, University of Chicago Press, vol. 104(4), pages 724-746, August.
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    12. Vickers, John, 1995. "Concepts of Competition," Oxford Economic Papers, Oxford University Press, vol. 47(1), pages 1-23, January.
    13. Collie, David R., 2000. "State aid in the European Union: The prohibition of subsidies in an integrated market," International Journal of Industrial Organization, Elsevier, vol. 18(6), pages 867-884, August.
    14. Brainard, S Lael, 1994. "Last One Out Wins: Trade Policy in an International Exit Game," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 35(1), pages 151-172, February.
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    Cited by:

    1. Fatih Cemil ÖZBUĞDAY & Erik BROUWER, 2016. "Measuring the Extent of European State Aid Control: An Econometric Analysis of the European Commission Decisions," Sosyoekonomi Journal, Sosyoekonomi Society, issue 24(30).

    More about this item

    Keywords

    state aid; exit; market integration;

    JEL classification:

    • F15 - International Economics - - Trade - - - Economic Integration
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L53 - Industrial Organization - - Regulation and Industrial Policy - - - Enterprise Policy

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