Strategic delegation and tariff protection with network externalities

Kangsik Choi () and Ki-Dong Lee
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Kangsik Choi: Pusan National University

The Japanese Economic Review, 2024, vol. 75, issue 1, No 4, 93-119

Abstract: Abstract In the presence of network externalities, we examine the endogenous delegation structure in an import-competing market with import tariff under Bertrand competition. We show that (i) with strong network externalities, choosing delegation for home and foreign firms is a dominant strategy, which implies that the managerial delegation for output expansion is socially desirable; (ii) with weak (intermediate) network externalities, home firm chooses delegation (no delegation) but foreign firm chooses no delegation (delegation) in equilibrium; Thus, delegation to expand output of home and foreign firms is a more profitable choice than no delegation if the strength of network externalities is sufficiently large.

Keywords: Network externalities; Delegation; Import tariff; Bertrand (search for similar items in EconPapers)
JEL-codes: F12 F13 L13 (search for similar items in EconPapers)
Date: 2024
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DOI: 10.1007/s42973-022-00118-x

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