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COST ASYMMETRIES AND INDUSTRIAL POLICY IN VERTICALLY RELATED MARKETS *
Author(s) -
KAWABATA YASUSHI
Publication year - 2012
Publication title -
the manchester school
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.361
H-Index - 42
eISSN - 1467-9957
pISSN - 1463-6786
DOI - 10.1111/j.1467-9957.2011.02246.x
Subject(s) - subsidy , economics , cournot competition , competition (biology) , production (economics) , microeconomics , intermediate good , production cost , industrial organization , market economy , engineering , ecology , biology , mechanical engineering
In this paper we examine how the conventional finding from de Meza ( Canadian Journal of Economics , Vol. 19 (1986), pp. 347–350) and Neary ( Journal of International Economics , Vol. 37 (1994), pp. 197–218) that the country with the lowest‐cost firm provides the highest subsidy modifies in a model of vertically related markets characterized by Cournot competition. We show that the country where the sum of the costs of final‐good production and intermediate‐good production are the lowest provides the largest production subsidies to the final good and/or the intermediate good.