THE SCOPE FOR NON-PROFIT OBJECTIVES IN A MIXED OLIGOPOLY UNDER INTERNATIONAL COMPETITION

Johan Willner, Sonja Grã–nblom, Annina Kainu and Johan Flink

Annals of Public and Cooperative Economics, 2018, vol. 89, issue 2, 415-436

Abstract: We ask how the scope for non-profit objectives in a state-owned enterprise (SOE) in a mixed oligopoly changes because of competition from firms in another country. There is no change if costs and demand are given, unless the trade partner is a low-cost country. However, the scope for non-profit objectives is limited by the country relative size if wages are market-clearing and if workers and firms are stationary, because of reduced competitiveness caused by higher real wage rates. The total surplus is then not affected by the actions of the SOE. International trade does not otherwise reduce the scope for its non-profit objectives if workers and firms are mobile, but productivity differences might require restrictions in order to avoid a complete relocation of the workforce in either country.

Date: 2018
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