NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

High-Cost Domestic Joint Ventures and International Competition: Do Domestic Firms Gain?

Ruth R. Raubitschek, Barbara J. Spencer

NBER Working Paper No. 4804
Issued in July 1994
NBER Program(s):   ITI

This paper develops the idea that when markets are imperfectly competitive, final producers may gain from a joint venture that produces part of their input requirements even though marginal cost exceeds the input's market price. Production by the joint venture lowers the market price of the input and this can raise profits sufficiently from final product sales to make the joint venture worthwhile. Also, use of a joint venture internalizes the positive externality from a lower input price. These results are motivated by a setting in which domestic firms are dependent on foreign oligopolistic suppliers for a key input.

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Document Object Identifier (DOI): 10.3386/w4804

Published: International Economic Review, Vol. 37, No. 2 (May 1996): 315-340. citation courtesy of

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