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SUBSIDIZATION AND BARGAINING IN MIXED OLIGOPOLIES
Author(s) -
Dapeng Cai,
Jie Li
Publication year - 2014
Publication title -
bulletin of economic research
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.227
H-Index - 29
eISSN - 1467-8586
pISSN - 0307-3378
DOI - 10.1111/j.1467-8586.2012.00453.x
Subject(s) - oligopoly , economics , monopoly , microeconomics , subsidy , competition (biology) , bargaining power , politics , welfare , social welfare , market economy , cournot competition , ecology , political science , law , biology
In this paper, we consider political interaction in a mixed oligopoly by characterizing how a subsidy is endogenously determined through the bargaining process between firms and politicians. We discuss how the nature of the political equilibrium changes with the type of competition, the specification of the cost function, and the timing of the game. We show that when bargaining between firms and politicians takes place, the resulting social welfare may be even worse than that under a public firm monopoly.