Implementing Market Access
Posted: 10 Sep 1996
This paper examines ex post subsidies as a means of enforcing market share targets. Subsidies set after firms make their strategic decisions are shown to create powerful incentives for firms to raise prices. These effects are stronger when targets, and hence, subsidies, are specified on a firm-specific rather than industry-wide basis. This occurs because firms perceive themselves as subject to more competition (i.e., more elastic demand) in the latter case.
JEL Classification: F13, H32, H87
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