The Korean Economic Review
Subsidization Policy on the Social Enterprise for the Underprivileged
Sumi Cho (Chonnam National University) and Sang-Ho Lee (Chonnam National University)Year 2017Vol. 33No. 1
We formulate an oligopoly model in which social enterprise for the underprivilegedcompetes with private enterprises under government subsidization, and examine the marketrole of private leadership. We show that Stackelberg private leadership is better from theviewpoint of total social welfare, while Cournot followership is better when the socialprovisions for the underprivileged are emphasized. We also find that both cost inefficiencyand the number of private enterprises affect the profitability and welfare consequences. Wethen investigate the rationing policy on the production of social enterprise and show thatoutput rationing is superior to market share rationing not only for the social concerns of theunderprivileged but also for total social welfare, even though it is less attractive than subsidypolicy. Finally, we find that there is a strategic over-incentive to pursue social activitiesunder government subsidization.