IDEAS home Printed from https://ideas.repec.org/p/ukc/ukcedp/0503.html
   My bibliography  Save this paper

Strategic Procurement, Openness and Market Structure

Author

Listed:
  • Maria del Carmen Garcia-Alonso

    ()

  • Paul Levine

Abstract

We examine strategic procurement behaviour by governments and its effect on market structure in sectors, such as defence, where the government is the dominant consumer. In a world economy with trade between producers, and between producers and non-producers, we use a modified Dixit-Stiglitz utility function with an independent taste for variety. Governments can, in effect, choose the number of domestic firms and their size by adjusting the procurement price. Unlike the standard model with no independent taste for variety and no external sector of non-producers, there are incentives for subsidies, openness impacts on industrial structure and there are potential gains from procurement coordination between producer countries.

Suggested Citation

  • Maria del Carmen Garcia-Alonso & Paul Levine, 2005. "Strategic Procurement, Openness and Market Structure," Studies in Economics 0503, School of Economics, University of Kent.
  • Handle: RePEc:ukc:ukcedp:0503
    as

    Download full text from publisher

    File URL: ftp://ftp.ukc.ac.uk/pub/ejr/RePEc/ukc/ukcedp/0503.pdf
    Download Restriction: no

    Other versions of this item:

    References listed on IDEAS

    as
    1. McAfee, R. Preston & McMillan, John, 1989. "Government procurement and international trade," Journal of International Economics, Elsevier, vol. 26(3-4), pages 291-308, May.
    2. García-Alonso, María D.C. & Levine, Paul, 2008. "Strategic procurement, openness and market structure," International Journal of Industrial Organization, Elsevier, vol. 26(5), pages 1180-1190, September.
    3. Baldwin, Robert E., 1984. "Trade policies in developed countries," Handbook of International Economics,in: R. W. Jones & P. B. Kenen (ed.), Handbook of International Economics, edition 1, volume 1, chapter 12, pages 571-619 Elsevier.
    4. Malcolm Chalmers & Neil V. Davies & Keith Hartley & Chris Wilkinson, 2002. "The economic costs and benefits of UK defence exports," Fiscal Studies, Institute for Fiscal Studies, vol. 23(3), pages 305-342, September.
    5. Marius BRÜLHART & Federico TRIONFETTI, 2000. "Public Expenditure and International Specialisation," Cahiers de Recherches Economiques du Département d'Econométrie et d'Economie politique (DEEP) 00.23, Université de Lausanne, Faculté des HEC, DEEP.
    6. Miyagiwa, Kaz, 1991. "Oligopoly and Discriminatory Government Procurement Policy," American Economic Review, American Economic Association, vol. 81(5), pages 1320-1328, December.
    7. Paul Levine & Fotis Mouzakis & Ron Smith, 2000. "Arms export controls and emerging domestic producers," Defence and Peace Economics, Taylor & Francis Journals, vol. 11(3), pages 505-531.
    8. Mary Carmen Garcia-Alonso, 1999. "Price competition in a model of arms trade," Defence and Peace Economics, Taylor & Francis Journals, vol. 10(3), pages 273-303.
    9. Dixit, Avinash K & Stiglitz, Joseph E, 1977. "Monopolistic Competition and Optimum Product Diversity," American Economic Review, American Economic Association, vol. 67(3), pages 297-308, June.
    10. Jonathan Eaton & Gene M. Grossman, 1986. "Optimal Trade and Industrial Policy Under Oligopoly," The Quarterly Journal of Economics, Oxford University Press, vol. 101(2), pages 383-406.
    11. Levine, Paul & Smith, Ron, 2000. "The Arms Trade Game: From Laissez-Faire to a Common Defence Policy," Oxford Economic Papers, Oxford University Press, vol. 52(2), pages 357-380, April.
    12. James J. Anton & Dennis A. Yao, 1992. "Coordination in Split Award Auctions," The Quarterly Journal of Economics, Oxford University Press, vol. 107(2), pages 681-707.
    13. Javier Coto-Martínez & María D. C. García-Alonso & Paul Levine, 2009. "Taste For Variety And Optimum Product Diversity In An Open Economy," Bulletin of Economic Research, Wiley Blackwell, vol. 61(2), pages 127-138, April.
    14. Brulhart, Marius & Trionfetti, Federico, 2004. "Public expenditure, international specialisation and agglomeration," European Economic Review, Elsevier, vol. 48(4), pages 851-881, August.
    15. Vagstad, Steinar, 1995. "Promoting fair competition in public procurement," Journal of Public Economics, Elsevier, vol. 58(2), pages 283-307, October.
    16. del Carmen Garcia-Alonso, Maria, 2000. "The role of technology security in a model of trade with horizontal differentiation," International Journal of Industrial Organization, Elsevier, vol. 18(5), pages 747-772, July.
    17. Garcia-Alonso, Maria D.C. & Levine, Paul, 2007. "Arms Trade and Arms Races: A Strategic Analysis," Handbook of Defense Economics, Elsevier.
    18. Krugman, Paul R., 1979. "Increasing returns, monopolistic competition, and international trade," Journal of International Economics, Elsevier, vol. 9(4), pages 469-479, November.
    19. Achilladelis, Basil & Antonakis, Nicholas, 2001. "The dynamics of technological innovation: the case of the pharmaceutical industry," Research Policy, Elsevier, vol. 30(4), pages 535-588, April.
    20. Paul Dunne & Maria del Carmen Garcia-Alonso & Paul Levine & Ron Smith, 2007. "Determining The Defence Industrial Base," Defence and Peace Economics, Taylor & Francis Journals, vol. 18(3), pages 199-221.
    21. Benassy, Jean-Pascal, 1996. "Taste for variety and optimum production patterns in monopolistic competition," Economics Letters, Elsevier, vol. 52(1), pages 41-47, July.
    22. Jean-Jacques Laffont & Jean Tirole, 1993. "A Theory of Incentives in Procurement and Regulation," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262121743, January.
    23. Beath,John & Katsoulacos,Yannis, 1991. "The Economic Theory of Product Differentiation," Cambridge Books, Cambridge University Press, number 9780521335263, April.
    24. Yang, Xiaokai & Heijdra, Ben J, 1993. "Monopolistic Competition and Optimum Product Diversity: Comment," American Economic Review, American Economic Association, vol. 83(1), pages 295-301, March.
    25. J Paul Dunne & Maria Garcia Alonso & Paul Levine & Ron Smith, 2003. "Concentration in the International Arms Industry¤," Working Papers 0301, Department of Accounting, Economics and Finance, Bristol Business School, University of the West of England, Bristol.
    26. Margaret K. Kyle, 2007. "Pharmaceutical Price Controls and Entry Strategies," The Review of Economics and Statistics, MIT Press, vol. 89(1), pages 88-99, February.
    27. Venables, Anthony J, 1987. "Trade and Trade Policy with Differentiated Products: A Chamberlinian-Ricardian Model," Economic Journal, Royal Economic Society, vol. 97(387), pages 700-717, September.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. García-Alonso, María D.C. & Levine, Paul, 2008. "Strategic procurement, openness and market structure," International Journal of Industrial Organization, Elsevier, vol. 26(5), pages 1180-1190, September.
    2. Paul Dunne & Maria del Carmen Garcia-Alonso & Paul Levine & Ron Smith, 2005. "Military Procurement, Industry Structure and Regional Conflict," Studies in Economics 0502, School of Economics, University of Kent.

    More about this item

    Keywords

    procurement; openness; market structure; defence and pharmaceutical sectors;

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • H56 - Public Economics - - National Government Expenditures and Related Policies - - - National Security and War
    • L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ukc:ukcedp:0503. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Tracey Girling). General contact details of provider: http://www.kent.ac.uk/economics/ .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.