Equilibrium State Aid in Integrating Markets

Stephen Martin () and Paola Valbonesi

The B.E. Journal of Economic Analysis & Policy, 2008, vol. 8, issue 1, 1-39

Abstract: We present a model of the impact of state aid on equilibrium market structure and on market performance in an integrating market when the process of integration is driven by consumer inertia. In a partial equilibrium model, it is an equilibrium for governments to grant state aid, even though this reduces common market welfare.

Date: 2008
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DOI: 10.2202/1935-1682.1904

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