Endogenous timing in a mixed duopoly under the optimal degree of privatization

This study revisits the endogenous timing game in a mixed duopoly by considering the situation in which a welfare‐maximizing government sets the optimal degree of privatization for a partially privatized firm. We present the following results. First, in quantity competition, the government sets the degree of privatization for the partially privatized firm to be positive or zero depending on the equilibrium in the subsequent observable delay game. The observable delay game has multiple equilibria and the firms choose either of two Stackelberg equilibria. Second, in price competition, the government chooses to fully nationalize the partially privatized firm, leading to a unique Bertrand equilibrium in the observable delay game.