Strategic Procurement, Openness and Market Structure

Maria Garcia-Alonso and Paul Levine ()

Studies in Economics from School of Economics, University of Kent

Abstract: We examine strategic procurement behaviour by governments and its effect on market structure in sectors, such as defence, where the government is the dominant consumer. In a world economy with trade between producers, and between producers and non-producers, we use a modified Dixit-Stiglitz utility function with an independent taste for variety. Governments can, in effect, choose the number of domestic firms and their size by adjusting the procurement price. Unlike the standard model with no independent taste for variety and no external sector of non-producers, there are incentives for subsidies, openness impacts on industrial structure and there are potential gains from procurement coordination between producer countries.

Keywords: procurement; openness; market structure; defence and pharmaceutical sectors (search for similar items in EconPapers)
JEL-codes: F12 H56 L10 (search for similar items in EconPapers)
Date: 2005-02
New Economics Papers: this item is included in nep-com
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Citations: View citations in EconPapers (2)

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Related works:
Journal Article: Strategic procurement, openness and market structure (2008)
Working Paper: Strategic Procurement, Openness and Market Structure (2004)
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