Reexamination of Strategic Public Policies

Abstract

This paper attempts to reinterpret the familiar approach to strategic public policies from the viewpoint of inefficiencies involved in oligopoly where firms engage in Cournot competition. To this end, we introduce tools called “quasi-reaction functions” and “quasi-supply curves”. These tools allow us to conduct analyses through use of the standard partial-equilibrium diagram, i.e. the quantity-price plane. We can find the relationship between prices and quantities directly and, hence, deal with inefficiencies easily and also suggest policies to correct such inefficiencies. Specifically, we reexamine public policies related to mixed-oligopoly, excess entry, technology choices with free entry and exit, and foreign oligopoly.