Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/93742
Authors: 
Glowicka, Ela
Year of Publication: 
2005
Series/Report no.: 
SFB/TR 15 Discussion Paper 177
Abstract: 
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 cost-reducing effort. When the exit is prevented, allocative and productive efficiencies are lower and the only gaining player is the rescued firm.
Subjects: 
subsidies
asymmetric oligopoly
exit
European Union
JEL: 
F13
L13
L52
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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