Bailouts in a common market: a strategic approach

Arbeitspapier

Governments in the EU grant Rescue and Restructure Subsidies to bail out ailing firms. In an international asymmetric Cournot duopoly we study effects of such subsidies on market structure and welfare. We adopt a common market setting, where consumers from the two countries form one market. We show that the subsidy is positive also when it fails to prevent the exit. The reason is a strategic effect, which forces the more efficient firm to make additional costreducing effort. When the exit is prevented, allocative and productive efficiencies are lower and the only gaining player is the rescued firm.

Angaben zum Objekt

• Sprache: Englisch

Verweise und Beziehungen

• Erschienen in: Series: WZB Discussion Paper ; No. SP II 2005-20

Klassifikation und Themen

• Klassifikation: Wirtschaft ; Trade Policy; International Trade Organizations ; Oligopoly and Other Imperfect Markets ; Industrial Policy; Sectoral Planning Methods
• Thema: Subsidies ; asymmetric oligopoly ; exit ; European Union

Beteiligte, Orts- und Zeitangaben

• Ereignis: Geistige Schöpfung
• (wer): Glowicka, Ela
• Ereignis: Veröffentlichung
• (wer): Wissenschaftszentrum Berlin für Sozialforschung (WZB)
• (wo): Berlin
• (wann): 2005

Weitere Informationen

• Handle: http://hdl.handle.net/10419/51053
• Letzte Aktualisierung: 10.03.2025, 11:44 MEZ