Endogenous Private Leadership under Subsidy Policy on the Social Enterprises

Cho, Sumi and Lee, Sang-Ho (2017): Endogenous Private Leadership under Subsidy Policy on the Social Enterprises.

Abstract

We investigate a mixed oligopoly model in which private enterprises compete with social enterprises under government subsidy policy, and examine the endogenous choice of private leadership. We show that private leadership is socially desirable, but the numbers of private and social enterprises affect endogenous choices and welfare consequences. We also show that the role of government in choosing the optimal subsidy will be significant when there are more than one private enterprises but its number is smaller than that of the social enterprises.

• Item Type: MPRA Paper
• Language: English
• Keywords: Social Enterprise; Private Enterprise; Private Leadership; Private Followership; Subsidization
• Subjects: D - Microeconomics > D4 - Market Structure, Pricing, and Design > D43 - Oligopoly and Other Forms of Market Imperfection; H - Public Economics > H2 - Taxation, Subsidies, and Revenue > H23 - Externalities ; Redistributive Effects ; Environmental Taxes and Subsidies; L - Industrial Organization > L1 - Market Structure, Firm Strategy, and Market Performance > L13 - Oligopoly and Other Imperfect Markets; L - Industrial Organization > L2 - Firm Objectives, Organization, and Behavior > L22 - Firm Organization and Market Structure; L - Industrial Organization > L3 - Nonprofit Organizations and Public Enterprise > L31 - Nonprofit Institutions ; NGOs ; Social Entrepreneurship

References

Amir R. and Stepanova, A. (2006). Second-mover Advantage and Price Leadership in Bertrand Duopoly. Games and Economic Behavior, 55(1), 1-20.

Bennett, J. and la Manna, M. (2012), “Mixed oligopoly, public firm behavior, and free private entry,” Economics Letters, 117(3), 767-769

Bian, J., Li, K.W., Guo, X. (2016). A Strategic Analysis of Incorporating CSR into Managerial Incentive Design. Transportation Research Part E: Logistics and Transportation Review, 86, 83-93.

Brand, B. and Grothe, M. (2015). Social Responsibility in a Bilateral Monopoly. Journal of Economics, 115(3), 275–289

Cho, S. M. and Lee, S. H. (2017). Subsidization Policy on the Social Enterprise for the Underprivileged. Korean Economic Review, 33(1), 153-178

Cremer, H., Marchand, M., and Thisse, J.-F. (1989). The Public Firm as an Instrument for Regulating an Oligopolistic Market,” Oxford Economic Papers, 41(2), 283–301.

Daughety, A. F. (1990), “Beneficial Concentration,” American Economic Review, 80(5), 1231-1237.

Dowrick, S. (1986). von Stackelberg and Cournot duopoly: Choosing roles,” Rand Journal of Economics, 17(2), 251-260.

Estrin, S. and D. de Meza, (1995). Unnatural Monopoly. Journal of public Economics, 57(3), 471-488.

Flores, D. and Garcia, A. (2016). On the Output and Welfare Effects of a non-Profit Firm in a Mixed Duopoly: A Generalization. Economic Systems, 40, 631-637

Gal-Or, E. (1985). First Mover and Second Mover Advantages,” International Economic Review, 26(3), 649-653.

Haraguchi, J. and Matsumura, T. (2016). Cournot–Bertrand Comparison in a Mixed Oligopoly. Journal of Economics, 117(2), 117–136.

Hamilton, J. H. and Slutsky, S. M. (1990). Endogenous Timing in Duopoly Games: Stackelberg or Cournot Equilibria. Games and Economic Behavior, 2(1), 29-46.

Ino, H. and Matsumura, T. (2010). What Role Should Public Enterprises Play in Free-Entry Markets?. Journal of Economics, 101(3), 213–30.

Ino, H. and Matsumura, T. (2012). How Many Firms Should Be Leaders? Beneficial Concentration Revisited. International Economic Review, 53(4), 1323-1340.

Kim, S. W., Kwag, S.H., Park, H.J., Lee, C.H., Seo, W, S., Lee, S.Y. and Kim, H.M. (2015), A Case Study on Social Enterprise for Disabled People, Chapter 3 Overseas Cases of Social Enterprise Employment for the Disabled, Policy Report on Korea Disabled People’s Development Institute

Kopel, M. and Brand, B. (2012). Socially Responsible Firms and Endogenous Choice of Strategic Incentives. Economic Modelling, 29, 982-989

Lambertini, L. and Tampieri, A. (2015). Incentives, Performance and Desirability of Socially Responsible Firms in a Cournot Oligopoly. Economic Modelling, 50, 40-48.

Liu, C.C., Wang, L.F.S. and Lee, S.H. (2015. Strategic Environmental Corporate Social Responsibility in a Differentiated Duopoly Market. Economics Letters, 129(4), 108-111.

Lu, Y., (2006). Endogenous Timing in a Mixed Oligopoly with Foreign Competitors: the Linear Demand Case. Journal of Economics, 88(1), 49–68.

Matsumura, T. and Ogawa, A. (2012). Price versus quantity in a mixed duopoly. Economics Letters, 116(2), 174–177.

Matsumura, T. and Ogawa, A. (2014). Corporate Social Responsibility or Payoff Asymmetry? A Study of an Endogenous Timing Game. Southern Economic Journal, 81(2), 457-473.

Ono, Y. (1978). The Equilibrium of Duopoly in a Market for Homogeneous Goods. Economica, 45(179), 287–295.

Pal, M. (1998). Endogenous Timing in a Mixed Oligopoly. Economics Letters, Vol. 61(2),181–185.

Roeger, K., Blackwood, A. and Pettijohn, S. (2012). The Nonprofit Almanac 2012. Washington, DC: The Urban Institute.

Report on the Social Impact Investment Taskforce Established under the UK’s Presidency of the G8, (2014). Impact Investment: The Invisible Heart of Markets: Harnessing the power of entrepreneurship, innovation and capital for public good.

Scrimitore, M. (2013). Price or Quantity?: The Strategic Choice of Subsidized Firms in a Mixed Duopoly. Economics Letters, 118(2), 337–341.

Scrimitore, M. (2014). Profitability under Commitment in Cournot and Bertrand Mixed Markets. Journal of Institutional and Theoretical Economics, 170(4), 684–703.

Van Damme, E. and Hurkens, S. (2004). Endogenous Price Leadership. Games and Economic Behavior, 47(2), 404–420

Nakamura, Y. (2017). Endogenous Market Structures in a Mixed Oligopoly with a Public Firm whose Managerial Contract is based on Welfare and Bargaining over the Managerial Contract of a Private Firm. Economia Politica, 34(2), 189–209.