Strategic Managerial Delegation and Industrial Policy Competition in Vertically-Related Markets

International Review of Economics and Finance, doi:10.1016/j.iref.2016.01.006

24 Pages Posted: 2 Dec 2015 Last revised: 20 Mar 2016

See all articles by Winston W. Chang

Winston W. Chang

University at Buffalo - Department of Economics

Fang-yueh Chen

National Chung Cheng University - Department of Economics

Date Written: November 27, 2015

Abstract

In a successive duopoly in which all firms are private except the home upstream SOE, we show that if the SOE is less efficient than its foreign rival, the home managerial delegation policy will force the SOE to price below marginal cost; otherwise, it will resort to marginal cost pricing to force out its rival. Both upstream firms will not be pure profit maximizers and will compete in profit and sales. The home government will subsidize its downstream firm if the market is large or the foreign rival's output is small. The foreign government will always subsidize its downstream firm.

Keywords: Vertically Related Markets; International Mixed Duopoly; Managerial Delegation; Production Subsidy

JEL Classification: D21, H21, H44, L21, L30

Suggested Citation

Chang, Winston W. and Chen, Fang-yueh, Strategic Managerial Delegation and Industrial Policy Competition in Vertically-Related Markets (November 27, 2015). International Review of Economics and Finance, doi:10.1016/j.iref.2016.01.006, Available at SSRN: https://ssrn.com/abstract=2697205 or http://dx.doi.org/10.2139/ssrn.2697205

Winston W. Chang (Contact Author)

University at Buffalo - Department of Economics ( email )

453 Fronczak Hall
Department of Economics, SUNY at Buffalo
Buffalo, NY 14260
United States
716-645-8671 (Phone)
716-645-2127 (Fax)

HOME PAGE: http://arts-sciences.buffalo.edu/economics/faculty/faculty-directory/chang.html

Fang-yueh Chen

National Chung Cheng University - Department of Economics ( email )

160 San-Hsing
Ming-Halung, Chia-Yi, 621
Taiwan, Republic of China
+886-5-2720411 Ext. 6195 (Phone)
+886-5-2720816 (Fax)

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