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Privatization neutrality theorem in a mixed oligopoly with firm asymmetry

Author

Listed:
  • Kojun Hamada

    (Faculty of Economics, Niigata University)

Abstract

This paper revisits the privatization neutrality theorem, which states that welfare is exactly the same before and after privatization when the government optimally subsidizes firms. Contrary to the existing literature that shows that this theorem does not hold when there is an asymmetry between a public firm and private firms in a mixed oligopoly, we prove that this theorem holds by appropriately setting the discriminatory subsidies. We show that, even if there exist differences in cost and/or the timing of production among firms, adopting the discriminatory subsidy policy leads to welfare neutrality.

Suggested Citation

  • Kojun Hamada, 2016. "Privatization neutrality theorem in a mixed oligopoly with firm asymmetry," Economics Bulletin, AccessEcon, vol. 36(1), pages 395-400.
    • Handle: RePEc:ebl:ecbull:eb-15-00639
    as

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    File URL: http://www.accessecon.com/Pubs/EB/2016/Volume36/EB-16-V36-I1-P41.pdf
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    References listed on IDEAS

    as
    1. Yoshihiro Tomaru, 2006. "Mixed Oligopoly, Partial Privatization and Subsidization," Economics Bulletin, AccessEcon, vol. 12(5), pages 1-6.
    2. White, Mark D., 1996. "Mixed oligopoly, privatization and subsidization," Economics Letters, Elsevier, vol. 53(2), pages 189-195, November.
    3. Joanna Poyago-Theotoky, 2001. "Mixed oligopoly, subsidization and the order of firms' moves: an irrelevance result," Economics Bulletin, AccessEcon, vol. 12(3), pages 1-5.
    4. Fjell, Kenneth & Heywood, John S., 2004. "Mixed oligopoly, subsidization and the order of firm's moves: the relevance of privatization," Economics Letters, Elsevier, vol. 83(3), pages 411-416, June.
    5. Gareth Myles, 2002. "Mixed oligopoly, subsidization and the order of firms' moves: an irrelevance result for the general case," Economics Bulletin, AccessEcon, vol. 12(1), pages 1-6.
    6. repec:ebl:ecbull:v:12:y:2002:i:1:p:1-6 is not listed on IDEAS
    7. Yoshihiro Tomaru & Masayuki Saito, 2010. "Mixed Duopoly, Privatization And Subsidization In An Endogenous Timing Framework," Manchester School, University of Manchester, vol. 78(1), pages 41-59, January.
    Full references (including those not matched with items on IDEAS)

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    Cited by:

    1. Kojun Hamada, 2018. "Privatization Neutrality Theorem: When a Public Firm Pursues General Objectives," The Japanese Economic Review, Japanese Economic Association, vol. 69(1), pages 59-68, March.

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    More about this item

    Keywords

    Privatization neutrality theorem; Mixed oligopoly; Firm asymmetry; Discriminatory subsidy; Stackelberg competition;
    All these keywords.

    JEL classification:

    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • H4 - Public Economics - - Publicly Provided Goods

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