Taxation on a mixed oligopoly in the presence of foreign ownership

The study considers an environmental R&D subsidy in a mixed duopoly with spillovers. Public and private firms compete in environmental R&D investments and the government sets the subsidy to environmental R&D. This study examines three cases: (a) the public firm cares for the environment and maximises the welfare; (b) it does not care for the environment and maximises the sum of consumer and producer surpluses net of subsidy; and (c) it is privatised and maximises its own profit. The main findings are as follows: 1) the optimal subsidies are positive in all three cases; 2) the optimal subsidy always increases with spillovers in case (a), but it may decrease with spillovers in cases (b) and (c); 3) the optimal subsidy is higher in case (a) than in case (b) if the seriousness of environmental damage generated by pollution is small, however the opposite case may be the case if it is large; 4) the use of subsidy results in higher total R&D and lower environmental damage in all three cases; 5) privatisation lowers optimal subsidy (or environmental damage) no matter whether the public firm cares for the environment or not; and 6) privatisation reduces welfare if the public firm cares for the environment, but may raise welfare if it does not care for the environment.

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“…52. See the related studies of Zhang, Zhong, and Mei (2016), Cie slik (2016) and Wang and Chiou (2016).…”

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confidence: 99%

Environmental R&D subsidy, spillovers and privatization in a mixed duopoly

Xing

Tan

Wang

2019

Economic Research-Ekonomska Istraživanja

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“…There remains a scope that collusive prospects in mixed oligopolies Downloaded by [University of California, San Diego] at 12:31 29 June 2016 may be reexamined in our asynchronous-move framework. Also pertaining to mixed oligopoly is Wang and Chiou (2016) who extensively study the effects of ownership structures including foreign ownership. Although their analysis has not yet extended to dynamic markets, such a direction may be a natural extension to pursue.…”

Section: Concluding Discussionmentioning

confidence: 99%

Infinite horizon oligopoly with asynchronous moves: Cournot-Bertrand reversal

Sasaki

2016

Asia-Pacific Journal of Accounting & Economics

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In an infinite-horizon oligopoly game, if moves are not synchronised across firms, sustainability of tacitly collusive equilibria becomes substantially distinct from that in a classical simultaneous-move supergame. In linear duopoly, the critical discount factor becomes higher in Bertrand than in Cournot, yet for a low discount factor with which collusion is unsustainable the equilibrium discounted streams of non-collusive profits are higher in a Bertrand game than in a Cournot game. These features are contrary to the well-known observation in synchronous-move supergames, reflecting the tendency that once a deviation path is initiated, then an asynchronousmove Cournot game converges to a competitive outcome more quickly than an asynchronous-move Bertrand game. ARTICLE HISTORY

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“…Social welfare is defined as the sum of consumer surplus, CS , the domestic firm's (i.e., DM's) profit

Π_{m}^{S}

, and tax revenue (if available) . Note that the MNF's profit is excluded from social welfare because the government does not care about a foreign company's profit (Chao and Yu, ; Matsumura and Tomaru, ; Wang and Chiou, ). Consumer surplus in this paper is characterized as follows, which is commonly used in the literature (Singh and Vives, ):

C S = false(a + θ false) q_{n} + a q_{m} - \frac{1}{2} (q_{n}^{2} + 2 q_{n} q_{m} + q_{m}^{2}) - false(p_{n} q_{n} + p_{m} q_{m} false) = \frac{1}{2} {(q_{n} + q_{m})}^{2} .

…”

Section: Tariff Regulation Of Governmentmentioning

confidence: 99%

Quality spillover, tariff, and multinational firms' local sourcing strategies

Niu

Chen

2018

Int Trans Operational Res

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It is prevalent for multinational firms (MNFs) to enter a market by importing products of superior quality, and then engage in local competition with domestic manufacturers (DMs). Alternatively, many MNFs voluntarily expose themselves to the risk of quality spillover by strategically sourcing from DMs to avoid the tariff burden. In this paper, we consider a DM and an MNF that strategically choose whether to source from the DM, and characterize the tradeoff between the tariff burden and the potential loss due to quality spillover. We analyze the supply chain parties' preferences over the MNF's sourcing strategies and the impact of the government's tariff regulation. We show that the MNF prefers domestic sourcing (DS) when the risk of quality spillover is low, while the manufacturer usually sees an opposite preference. However, we find that there exists a win‐win zone where both MNF and DM prefer the MNF's domestic sourcing simultaneously. From the government's perspective, DS always results in more output of high‐quality products, and more social welfare when quality spillover is sufficiently valuable. Interestingly, we find that, even if the quality spillover is limited, more social welfare can be obtained under DS, if the tariff rate is either low or high. The government is hence able to facilitate the incentive alignment between the MNF and the DM by adjusting the tariff regulation, which improves product quality and social welfare in the domestic market, although there exist some danger zones where the regulation is inefficient.

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Taxation on a mixed oligopoly in the presence of foreign ownership

Cited by 9 publications

References 29 publications

Environmental R&D subsidy, spillovers and privatization in a mixed duopoly

Environmental R&D subsidy, spillovers and privatization in a mixed duopoly

Infinite horizon oligopoly with asynchronous moves: Cournot-Bertrand reversal

Quality spillover, tariff, and multinational firms' local sourcing strategies

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