Public Firms in a Dynamic Third Market Model

Sofia B. S. D. Castro () and Antonio Brandao
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Sofia B. S. D. Castro: Faculdade de Economia da Universidade do Porto

FEP Working Papers from Universidade do Porto, Faculdade de Economia do Porto

Abstract: We set the third market model in a dynamic context to decide whether a country can achieve benefits by subsidizing a public rm's exports. We use calculus of variations with the constraint that the welfare is either maximized or grows at constant rate, reflecting the public concern of the firm. We conclude that a subsidy can be a good strategy for the country in some instances, even though only over a finite period of time. The duration of this period depends on the output strategy of the public firm as well as on exogenous factors.

Keywords: public firms; strategic trade policy; third market model; calculus of variations (search for similar items in EconPapers)
JEL-codes: F13 L32 (search for similar items in EconPapers)
Pages: 16 pages
Date: 2001-01
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:por:fepwps:103

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