Tsuyoshi Shinozaki

The Closed-Loop Effects of Market Integration in a Dynamic Duopoly

This paper develops a dynamic game model of reciprocal dumping to reconsider welfare effects of market integration, i.e. reductions in transport costs. We show that welfare under trade is unambiguously less than welfare under autarky for any level of transport costs, which is impossible in static models where trade is profitable if the transport cost is low enough. This is because the negative effect through closed-loop property of feedback strategies dominates the positive effects.

Population growth and the transfer paradox in an overlapping generations model

This study investigates whether the transfer paradox (donor enrichment and/or recipient impoverishment) occurs when a donor and a recipient have different population growth rates by using a one‐sector, two‐country overlapping generations model. We show that if the population growth rates differ, neither donor enrichment nor recipient impoverishment occurs in the steady state under dynamic efficiency. This result is in stark contrast to the existing results that the transfer paradox might occur when a donor and a recipient country have different marginal propensities to save, assuming that both have the same population growth rate. Furthermore, we present the condition for the transfer problem to occur on the transition path and show that the transfer paradox is less likely to occur as the economy converges to the steady state. Our result shows that the prevailing finding that the transfer paradox can occur in an overlapping generations model is limited to the special case of countries having the same population growth rate.

International Mixed Oligopoly

This chapter outlines the basic properties of an international mixed oligopoly and considers the policy implications of privatization in the context of a strategic trade policy. We show here that the government sets a low level of privatization to reduce the profit of foreign firms in a non-corporative equilibrium. In a free-entry equilibrium, the number of private firms affects the degree of privatization in an international mixed oligopoly model. We present the complimentary relationship between import tariffs and the degree of privatization. Furthermore, we consider a corporative privatization policy. Regarding a non-corporative equilibrium, a higher degree of privatization in both countries improves global welfare.

Physical Capital Accumulation and Partial Privatization

This chapter investigates the effect of capital accumulation on partial privatization. We extend the dynamic oligopoly model proposed by Cellini and Lambertini in 1998 to a dynamic mixed oligopoly model. We show that (i) when a steady state is characterized by a demand-driven (i.e., static) equilibrium, partial privatization is adopted and the privatization ratio perfectly corresponds to the static model; (ii) when a public firm produces Ramsey output, the level of social welfare in a steady state does not depend on the privatization ratio; and (iii) when a private firm produces Ramsey output, the government adopts a full nationalization policy. The results of (ii) and (iii) are in contrast with the static result that partial privatization is optimal.

Optimal Partial Privatization in an International Mixed Oligopoly Under Various Tax Principles

This chapter considers optimal privatization policy in an international mixed oligopoly. Allowing for partial privatization and cost asymmetry, we analyze the optimal policies under various tax regimes: arbitrary taxation, origin principle, destination principle, import tariffs, and a combination of tax and import tariffs. Our main results are as follows. First, when the government can arbitrarily levy taxes on a public firm’s output, maximum welfare is independent of the degree of privatization as long as the public firm is at least partially privatized. Second, under tax schemes that restrict freedom of taxation, an optimal privatization policy depends on tax regimes and cost asymmetry. Third, the elimination of import tariffs and the privatization of public firms improve both domestic welfare and a foreign competitor’s profit if a production subsidy is introduced in exchange for tariff elimination. Our results suggest that fiscal incentives such as tax and subsidies are superior in maximizing welfare when compared with managerial incentives such as public ownership.

Political Economic Analysis of Privatization

This chapter analyzes the effect of domestic lobbying on the optimal degree of privatization and social surplus in a closed mixed oligopoly model and an extended two-country model. We find that lobbying activity leads to overprivatization in a closed economy and may improve social welfare in a two-country economy. When each country’s benevolent government determines the optimal privatization level, the privatization level always leads to underprivatization. This means an open trade policy leads to underprivatization. However, our results show that overprivatization may also exist in an open economy.

Basic Properties of a Mixed Oligopoly Model

In this chapter, we discuss previous studies and summarize the properties of a mixed oligopoly. With our overview of a mixed oligopoly model, we attempt to understand the fundamental characteristics of government intervention within an oligopoly. We consider the partial privatization problem in relation to the Stackelberg leader solution. The second-best outcome can be achieved by partial privatization. We also show that full privatization is not optimal if private firms can enter the oligopolistic market. In a free-entry equilibrium, the government can control excessive entry by imposing an entry tax.

Dynamic Interactions in Trade Policy in a Differential Game Model of Tariff Protection

This paper develops a two‐country dynamic game model of tariff protection to reconsider optimal trade policies and their implications for welfare. The authors show that an import subsidy is optimal in the feedback Nash equilibria, which results in a curious possibility that the domestic market is monopolized by the foreign firm. However, welfare comparisons among Nash equilibria, free trade, and autarky reveal that feedback Nash equilibria involve higher welfare than both autarky and free trade, i.e. dynamic noncooperative choices of policy serve as tacit policy coordination and ensure larger trade gains relative to free trade.