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Time-inconsistent Output Subsidy/Tax Policies in Free-entry Mixed Markets

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  • Chen, Jiaqi
  • Lee, Sang-Ho
  • Muminov, Timur

Abstract

This paper considers time-inconsistent output subsidy/tax policies in free-entry mixed markets and compares committed and non-committed regimes under different competition modes. In a committed regime where the subsidy is determined before the private firms enter the market, the optimal rate is zero in either Cournot game or Stackelberg game when the public firm is a follower, while it is negative in Stackelberg game with public leadership. However, in the non-committed regime where the subsidy is not determined before entry, the optimal rate is always positive. Finally, we show that private leadership is the best for social welfare regardless of the timing of output subsidy/tax policies.

Suggested Citation

  • Chen, Jiaqi & Lee, Sang-Ho & Muminov, Timur, 2019. "Time-inconsistent Output Subsidy/Tax Policies in Free-entry Mixed Markets," MPRA Paper 91453, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:91453
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Xu, Lili & Lee, Sang-Ho, 2020. "Strategic Relations between Corporate Social Responsibility and Partial Privatization Policy with Foreign Penetration," MPRA Paper 100770, University Library of Munich, Germany.
    2. Jiaqi Chen & Sang-Ho Lee & Timur K. Muminov, 2021. "Welfare-reducing discriminatory output subsidies with mixed ownership and R&D," Economics Bulletin, AccessEcon, vol. 41(3), pages 1592-1602.
    3. Cho, Sumi & Kim, Doori & Lee, Sang-Ho, 2021. "Free licensing strategy and ex post privatization in a mixed oligopoly," MPRA Paper 106126, University Library of Munich, Germany.
    4. Arturo Garcia & Mariel Leal & Sang-Ho Lee, 2021. "Competitive CSR in a strategic managerial delegation game with a multiproduct corporation," International Review of Economics, Springer;Happiness Economics and Interpersonal Relations (HEIRS), vol. 68(3), pages 301-330, September.
    5. Cho, Sumi & Kim, Doori & Lee, Sang-Ho, 2022. "Free licensing strategy and ex-post privatization policy with passive ownership," Economic Modelling, Elsevier, vol. 106(C).
    6. Lili Xu & Fanrui Su & Sang-Ho Lee, 2023. "Strategic corporate social responsibility and partial privatization policy with foreign penetration," The Japanese Economic Review, Springer, vol. 74(2), pages 251-278, April.
    7. Xu, Lili & Lee, Sang-Ho, 2021. "Strategic corporate social responsibility and tariff policies: The timing of commitments and policy implications," MPRA Paper 108499, University Library of Munich, Germany.

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    More about this item

    Keywords

    Free-entry mixed market; Committed policy; Non-committed policy; Output subsidy;
    All these keywords.

    JEL classification:

    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
    • H42 - Public Economics - - Publicly Provided Goods - - - Publicly Provided Private Goods
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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