Local Government Startup Supporting Policy: An Economic Approach

This paper analyzes local government startup supporting policy through the lens of economic principles. To analyze the effectiveness of supporting policy, the paper employs inter-temporal maximization and a game theory. The analysis indicates that with uncertainty “simply receiving subsidy” is a dominant strategy over “sincerely operating a firm”. The existence of uncertainty induces more pre-cautionary savings; thus a new businessman uses less resources for the firm during the supporting period. The analysis also suggests that reducing the uncertainty through a social safety net, for example low cost bankruptcy, can improve current problems of supporting programs.