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Corresponding Author:
Luciano Fanti, Department of Economics and Management, University of Pisa, Italy

Corresponding Coauthors:
Domenico Buccella , Kozminsky University, Warsaw, Poland

Firms Controlled by Owners and Managerial Firms: The 'Strategic' Trade Policy Game Revisited

(pp. 51-72)
JEL classification: F16, J51, L13
Keywords: Export Subsidy/Tax, Prisoner's Dilemma, Managerial Delegation, Owner-Manager Bargaining, Cournot Duopoly


This paper re-examines the strategic trade policy issue by considering a bargaining process over managerial contracts and different firms’ organizational structures; that is, either family ownership or atomistic shareholders whose board of directors delegate output choice to managers keep control over the firm. We show that, in contrast to the traditional results, a plethora of Nash equilibria emerges and the implementation of trade policies in both countries may be efficient (i.e. national social welfares are higher than under free trade) in the presence of a bargaining process in a sales delegation game. Such equilibria depend on the manager's bargaining power as well as the degree of product competition. The paper’s findings suggest that trade policy-makers should also take into account the ownership structure and the corresponding organizational form of the exporting firms.

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Institute for International Economics
of the Genoa Chamber of Commerce

Istituto di Economia Internazionale
Camera di Commercio di Genova
Via Garibaldi, 4 (III piano) - 16124 Genova (Italy)