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Interregional mixed duopoly

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Author Info

  • Inoue, Tomohiro
  • Kamijo, Yoshio
  • Tomaru, Yoshihiro

Abstract

We investigate an interregional mixed duopoly wherein a local public firm competes against a private firm. We employ a spatial model with price competition. The public firm is owned by the local government of the left half of the linear city called Region 1, and maximizes its welfare. We demonstrate that our two-stage game comprising location choice and price competition has two types of equilibria. In one equilibrium (E1), the local public firm locates in Region 1, and the private firm locates outside the region. In the other equilibrium (E2), both firms are located in Region 1. We find that although the two firms are closely located in E2, E2 payoff-dominates E1. Moreover, E2 is robust in the sense that the sequential choice of location adopts this equilibrium, regardless of whether the public firm is a leader or a follower.

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Bibliographic Info

Article provided by Elsevier in its journal Regional Science and Urban Economics.

Volume (Year): 39 (2009)
Issue (Month): 2 (March)
Pages: 233-242

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Handle: RePEc:eee:regeco:v:39:y:2009:i:2:p:233-242

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Web page: http://www.elsevier.com/locate/regec

Related research

Keywords: Interregional mixed duopoly Local public firm Spatial model;

References

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  1. Barcena-Ruiz, Juan Carlos & Begona Garzon, Maria, 2005. "Economic integration and privatisation under diseconomies of scale," European Journal of Political Economy, Elsevier, vol. 21(1), pages 247-267, March.
  2. de Fraja, Giovanni & Delbono, Flavio, 1989. "Alternative Strategies of a Public Enterprise in Oligopoly," Oxford Economic Papers, Oxford University Press, vol. 41(2), pages 302-11, April.
  3. Matsushima, Noriaki, 2001. "Cournot competition and spatial agglomeration revisited," Economics Letters, Elsevier, vol. 73(2), pages 175-177, November.
  4. CREMER, Helmuth & MARCHAND, Maurice & THISSE, Jacques-François, . "Mixed oligopoly with differentiated products," CORE Discussion Papers RP -930, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  5. Matsumura, Toshihiro, 1998. "Partial privatization in mixed duopoly," Journal of Public Economics, Elsevier, vol. 70(3), pages 473-483, December.
  6. Matsushima, Noriaki & Matsumura, Toshihiro, 2006. "Mixed oligopoly, foreign firms, and location choice," Regional Science and Urban Economics, Elsevier, vol. 36(6), pages 753-772, November.
  7. Ohsawa, Yoshiaki, 1999. "Cross-border shopping and commodity tax competition among governments," Regional Science and Urban Economics, Elsevier, vol. 29(1), pages 33-51, January.
  8. Pal, Debashis, 1998. "Does Cournot competition yield spatial agglomeration?," Economics Letters, Elsevier, vol. 60(1), pages 49-53, July.
  9. Toshihiro Matsumura & Noriaki Matsushima, 2003. "Mixed Duopoly with Product Differentiation: Sequential Choice of Location," Australian Economic Papers, Wiley Blackwell, vol. 42(1), pages 18-34, 03.
  10. THARAKAN , Joe & THISSE, Jacques-François, . "The importance of being small. Or when countries are areas and not points," CORE Discussion Papers RP -1542, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  11. Noriaki Matsushima & Toshihiro Matsumura, 2003. "Mixed oligopoly and spatial agglomeration," Canadian Journal of Economics, Canadian Economics Association, vol. 36(1), pages 62-87, February.
  12. Juan Bárcena-Ruiz, 2007. "Endogenous Timing in a Mixed Duopoly: Price Competition," Journal of Economics, Springer, vol. 91(3), pages 263-272, July.
  13. Hikaru Ogawa & Yasuo Sanjo, 2007. "Location Of Public Firm In The Presence Of Multinational Firm: A Mixed Duopoly Approach ," Australian Economic Papers, Wiley Blackwell, vol. 46(2), pages 191-203, 06.
  14. Toshihiro Matsumura & Takao Ohkawa & Daisuke Shimizu, 2005. "Partial Agglomeration or Dispersion in Spatial Cournot Competition," Southern Economic Journal, Southern Economic Association, vol. 72(1), pages 224–235, July.
  15. Pal, Debashis, 1998. "Endogenous timing in a mixed oligopoly," Economics Letters, Elsevier, vol. 61(2), pages 181-185, November.
  16. Juan Carlos Bárcena-Ruiz & María Begoña Garzón, 2005. "International Trade and Strategic Privatization," Review of Development Economics, Wiley Blackwell, vol. 9(4), pages 502-513, November.
  17. Toshihiro Matsumura & Noriaki Matsushima, 2004. "Endogenous Cost Differentials between Public and Private Enterprises: A Mixed Duopoly Approach," Economica, London School of Economics and Political Science, vol. 71(284), pages 671-688, November.
  18. Hamilton, Jonathan H. & Slutsky, Steven M., 1990. "Endogenous timing in duopoly games: Stackelberg or cournot equilibria," Games and Economic Behavior, Elsevier, vol. 2(1), pages 29-46, March.
  19. Kenneth Fjell & Debashis Pal, 1996. "A Mixed Oligopoly in the Presence of Foreign Private Firms," Canadian Journal of Economics, Canadian Economics Association, vol. 29(3), pages 737-43, August.
  20. Debashis Pal & Mark D. White, 1998. "Mixed Oligopoly, Privatization, and Strategic Trade Policy," Southern Economic Journal, Southern Economic Association, vol. 65(2), pages 264-281, October.
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Citations

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Cited by:
  1. Hikaru Ogawa & Yasuo Sanjo, 2011. "Market integration and location choice: a mixed oligopoly approach," Letters in Spatial and Resource Sciences, Springer, vol. 4(3), pages 157-166, October.
  2. Juan Bárcena-Ruiz & F. Casado-Izaga, 2012. "Location of public and private firms under endogenous timing of choices," Journal of Economics, Springer, vol. 105(2), pages 129-143, March.
  3. Hiroshi Aiura & Yasuo Sanjo, 2010. "Privatization of local public hospitals: effect on budget, medical service quality, and social welfare," International Journal of Health Care Finance and Economics, Springer, vol. 10(3), pages 275-299, September.
  4. Takeshi Ebina & Toshihiro Matsumura & Daisuke Shimizu, 2009. "Mixed oligopoly and spatial agglomeration in quasi-linear city," Economics Bulletin, AccessEcon, vol. 29(4), pages 2722-2729.

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