Subsidizing (and taxing) business procurement

• 成果类型: Article
• 署名作者: Asker, John
• 署名单位: New York University
• 刊物名称: JOURNAL OF PUBLIC ECONOMICS
• ISSN/ISSBN: 0047-2727
• DOI: 10.1016/j.jpubeco.2008.01.005
• 发表日期: 2008
• 页码: 1629-1643
• 关键词: subsidy; tax; overshifting; pass-through; imperfect competition; vertical market; procurement; auctions; competitive tender

摘要

This paper studies the effect of a subsidy (or tax) on a market where a downstream manufacturer uses a competitive tender to procure inputs from upstream suppliers. Subsidizing input production can result in input price decreases that are greater than the effective decrease in marginal costs. That is, overshifting occurs. When the size of the subsidy is not too large, the downstream firm can enjoy an increase in profits greater than the government expenditure on the subsidy. A relatively weak sufficient condition for these results to hold is that suppliers earn a positive profit margin on the marginal unit sold, before taking into account any subsidy payment. Stronger sufficient conditions, tailored to each result, are provided. (c) 2008 Elsevier B.V. All rights reserved.