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Public Firms in a Dynamic Third Market Model

  • Sofia B. S. D. Castro

    ()

    (Faculdade de Economia da Universidade do Porto)

  • António Brandão

    ()

    (CETE, Faculdade de Economia da Universidade do Porto)

We set the third market model in a dynamic context to decide whether a country can achieve benefits by subsidizing a public rm's exports. We use calculus of variations with the constraint that the welfare is either maximized or grows at constant rate, reflecting the public concern of the firm. We conclude that a subsidy can be a good strategy for the country in some instances, even though only over a finite period of time. The duration of this period depends on the output strategy of the public firm as well as on exogenous factors.

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File URL: http://www.fep.up.pt/investigacao/workingpapers/wp103.pdf
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Paper provided by Universidade do Porto, Faculdade de Economia do Porto in its series FEP Working Papers with number 103.

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Length: 16 pages
Date of creation: Jan 2001
Date of revision:
Handle: RePEc:por:fepwps:103
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  1. Brander, James A., 1995. "Strategic trade policy," Handbook of International Economics, in: G. M. Grossman & K. Rogoff (ed.), Handbook of International Economics, edition 1, volume 3, chapter 27, pages 1395-1455 Elsevier.
  2. de Fraja, Giovanni & Delbono, Flavio, 1990. " Game Theoretic Models of Mixed Oligopoly," Journal of Economic Surveys, Wiley Blackwell, vol. 4(1), pages 1-17.
  3. James Brander & Paul Krugman, 1982. "A 'Reciprocal Dumping' Model of International Trade," Working Papers 513, Queen's University, Department of Economics.
  4. de Fraja, Giovanni & Delbono, Flavio, 1989. "Alternative Strategies of a Public Enterprise in Oligopoly," Oxford Economic Papers, Oxford University Press, vol. 41(2), pages 302-11, April.
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