Trade Policies and Outsourcing for Market Dominance

Yao-Tung Chen ()
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Yao-Tung Chen: Ming Chuan University, Postal: Yao-Tung Chen, Associate Professor, Department of Risk Management and, Insurance, Ming Chuan University, 250 Chung-Shan N. Rd. Sec. 5, Taipei, 111 Taiwan, R.O.C.,

Journal of Economic Integration, 2007, vol. 22, 382-396

Abstract:

This paper attempts to analyze the effect of trade policies on the prices of both final and intermediate goods, when outsourcing part of production is a means used to obtain the market dominance in the host country. The market dominance could be granted by the host country to a foreign firm as a reward for its transferring of technology through outsourcing. It is found that when the subsidy by the host country on the production of intermediate inputs is substantial and if the demand curve is concave, a reduction in tariff on the final goods would lead to a rise in the price of both the final and intermediate goods. Consequently, this produces an anti-competitive result.

Keywords: Outsourcing; Cournot duopoly; Market dominance (search for similar items in EconPapers)
JEL-codes: F12 F13 (search for similar items in EconPapers)
Date: 2007
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Persistent link: https://EconPapers.repec.org/RePEc:ris:integr:0399

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