Trade and Industrial Policy under International Oligopoly by Sajal Lahiri

By Sajal Lahiri

The life of agencies with various degrees of potency inside of a rustic performs an immense function during this in-depth research of business and alternate rules in a multi-country trade-theoretic framework. Sajal Lahiri and Yoshiyasu Ono study a number of business guidelines, R&D subsidies and exchange guidelines below stipulations of imperfect festival in a product industry created through the presence of Cournot oligopolistic interdependence in construction. The publication covers commodity exchange (assuming complete employment) and overseas direct funding (assuming unemployment) making it of curiosity to researchers, complex scholars and coverage makers.

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Example text

In this way we are able to generalize many of the results on the welfare effects of entry–exit policies. We focus directly on the number of firms and on the issue of elimination of a marginal firm. In this sense this chapter slots in between the no-entry oligopoly model and the free-entry ones. 3 obtains a number of general results on the welfare effect of removing a firm. 4 assumes the demand function to be linear and derives more specific results than the ones obtained in the preceding sections. For example, we obtain specific values for the critical share of a firm below which the firm should be removed.

4 we examine the welfare effect of helping a minor firm and see how the existence of R&D investments affects the critical share obtained in the previous chapter. 5, in two subsections. 2 characterizes optimal discriminatory subsidies under asymmetric oligopoly. 6 concludes. 2 The model We consider a market in which there are two firms (1 and 2) with different initial marginal costs. They compete in a two-stage game. In stage 1 each firm invests in R&D, which determines the level of the marginal cost in stage 2.

In this section we examine how small is the critical foreign share below which more restrictions on the foreign share increase domestic welfare. Obviously, the critical share depends on the shape of the demand function and that of each firm’s cost function. In order to get some numerical values for the critical share, we assume a linear demand curve and constant marginal costs which may differ among firms. As we shall find out in the following analysis, the critical share is surprisingly high. 12) and that the total cost for firm i is given by c i = γi xi .

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