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Firms controlled by owners and managerial firms: the "strategic" trade policy game revisited

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  • Luciano Fanti
  • Domenico Buccella

Abstract

This paper revisits the strategic trade policy issue by considering a bargaining process over managerial contracts and different firms' organizational structures, that is, either family ownership keeping also the firm's control or atomistic shareholders whose board of directors delegate output choice to managers. 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, depending on the manager's bargaining power as well as the degree of product competition.

Suggested Citation

  • Luciano Fanti & Domenico Buccella, 2017. "Firms controlled by owners and managerial firms: the "strategic" trade policy game revisited," Discussion Papers 2017/215, Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy.
  • Handle: RePEc:pie:dsedps:2017/215
    Note: ISSN 2039-1854
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    More about this item

    Keywords

    Export subsidy/tax; Prisoner EÖs 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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