Cross‐Ownership, Delegation, and Policy Commitment

ABSTRACT This paper examines how cross‐ownership and strategic delegation interact with trade policy under policy commitment and non‐commitment regimes. We develop a Cournot export‐rivalry framework in which governments choose export subsidies or import tariffs, while firms strategically determine managerial incentive schemes. A higher degree of cross‐ownership generates opposing collusive and incentive effects, leading to non‐monotonic outcomes in output, profits, and welfare. Under export subsidies, strategic delegation intensifies competition and exacerbates the prisoner's dilemma. However, under non‐commitment, firms strategically distort incentive schemes to influence policy intervention, generating time‐consistency problems and non‐monotonic welfare effects. We further show that increasing cross‐ownership gradually mitigates policy distortions and, under a quadratic cost structure, may reverse the optimal policy from an export subsidy to an export tax. Overall, the results highlight that ownership structure, managerial incentives, and policy commitment jointly determine optimal trade policy and welfare outcomes.