Should One Sell Domestic Firms to Foreign Ones? A Tale of Delegation, Acquisition and Collusion

Dragone, Davide (2008) Should One Sell Domestic Firms to Foreign Ones? A Tale of Delegation, Acquisition and Collusion. Bologna: Dipartimento di Scienze economiche DSE, p. 26. DOI 10.6092/unibo/amsacta/4627. In: Quaderni - Working Paper DSE (623). ISSN 2282-6483.
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Abstract

In a model of repeated Cournot competition under complete information, I show how the existence of a fringe of managerial firms affects the stability of a cartel of strict profit-maximizing firms. There always exists a critical dimension of the fringe that makes the cartel unstable, and this dimension is non-monotone in the total number of Örms. By appropriately selecting the dimension of the fringe, a policy maker can affect the equilibrium outcome. As an example, I consider the case of a domestic authority that is contemplating whether to allow entry of a fringe of managerial foreign firms in the domestic market to increase the competitive pressure, thereby enhancing domestic welfare.

Abstract
Document type
Monograph (Working Paper)
Creators
CreatorsAffiliationORCID
Dragone, Davide
Keywords
Delegation, Cournot oligopoly, Cartel stability, Fringe.
Subjects
ISSN
2282-6483
DOI
Deposit date
16 Feb 2016 15:04
Last modified
16 Feb 2016 15:04
URI

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