Purchase and rental subsidies in durable-oligopolies

Amagoia Sagasta and José M. Usategui ()
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José M. Usategui: Universidad del País Vasco

Hacienda Pública Española / Review of Public Economics, 2015, vol. 213, issue 2, 11-40

Abstract: We fully characterize the effects of per unit subsidies for the purchase and rental of durable goods, considering subsidies in the present and subsidies in the future, under imperfect competition. We show how welfare is affected by the simultaneous consideration of subsidies on renting and selling and how the effects of a change in one of those subsidies depend on its interaction with other subsidies. Among other results we explain why a subsidy in the future mitigates the commitment problem of producers when they sell and rent the durable good in the present, we find the region in the space of subsidies where a subsidy on sales in the present simultaneously increases the consumer, producer and total surpluses, and we show that the cost of subsidies may change in the opposite direction to the direction of change in any one subsidy.

Keywords: subsidies; durable good; oligopoly; interaction between subsidies; cost of subsidies (search for similar items in EconPapers)
JEL-codes: H22 H24 H32 L13 (search for similar items in EconPapers)
Date: 2015
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