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Mixed oligopoly and spatial price discrimination with foreign firms

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  • Heywood, John S.
  • Ye, Guangliang

Abstract

This paper is the first to examine the welfare consequences of foreign competition in a mixed oligopoly set in a linear model of spatial price discrimination. It demonstrates that the entry of a foreign firm often lowers domestic welfare. This results because the public firm locates largely independently of the presence of the foreign firm and because the profit earned by the foreign firm reduces domestic welfare. Privatization of the public firm typically lowers domestic welfare but can increase global welfare. Thus, domestic governments are unlikely to allow foreign entry and when they do, they are unlikely to privatize the public firm despite the potential rise in global welfare.

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Bibliographic Info

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

Volume (Year): 39 (2009)
Issue (Month): 5 (September)
Pages: 592-601

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Handle: RePEc:eee:regeco:v:39:y:2009:i:5:p:592-601

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

Related research

Keywords: Mixed oligopoly Public enterprise Spatial price discrimination;

References

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  4. HAMILTON, Jonathan H. & THISSE, Jacques-François & WESKAMP, Anita, . "Spatial discrimination. Bertrand vs. Cournot in a model of location choice," CORE Discussion Papers RP -846, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
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  7. 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.
  8. Noriaki Matsushima & Toshihiro Matsumura, 2003. "Mixed oligopoly and spatial agglomeration," Canadian Journal of Economics, Canadian Economics Association, vol. 36(1), pages 62-87, February.
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  17. 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.
  18. Rothschild, R. & Heywood, John S. & Monaco, Kristen, 2000. "Spatial price discrimination and the merger paradox," Regional Science and Urban Economics, Elsevier, vol. 30(5), pages 491-506, September.
  19. 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.
  20. Hay, D A, 1976. "Sequential Entry and Entry-Deterring Strategies in Spatial Competition," Oxford Economic Papers, Oxford University Press, vol. 28(2), pages 240-57, July.
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  23. Pal, Debashis, 1998. "Endogenous timing in a mixed oligopoly," Economics Letters, Elsevier, vol. 61(2), pages 181-185, November.
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Citations

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Cited by:
  1. Kress, Dominik & Pesch, Erwin, 2012. "Sequential competitive location on networks," European Journal of Operational Research, Elsevier, vol. 217(3), pages 483-499.
  2. Matsumura, Toshihiro & Ogawa, Akira, 2014. "Inefficient but robust public leadership," MPRA Paper 56539, University Library of Munich, Germany.
  3. Hiroaki Ino & Toshihiro Matsumura, 2010. "What role should public enterprises play in free-entry markets?," Journal of Economics, Springer, vol. 101(3), pages 213-230, November.
  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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