Strategic Privatization and Regulation Policy in Mixed Markets
AbstractIn this article, the authors consider mixed oligopoly markets for differentiated goods, where private and public firms compete either in price or quantity. This is a study of the welfare effect of privatization— interpreted as partial strategic delegation of the public firm to a private manager with profit concern. It is shown that partial privatization improves welfare with ‘quantity competition’ when goods are substitutes; and with ‘price competition’ when goods are complements. However, full privatization (complete delegation to private manager) can never be optimal. It is also shown that a public firm can make more profit than a private firm in equilibrium, and that this possibility is more likely under quantity competition. With regard to market regulation policy, it is articulated that (i) public and private firms should be taxed in the same manner; and (ii) price regulation is better than quantity regulation.
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Bibliographic InfoArticle provided by IUP Publications in its journal The IUP Journal of Managerial Economics.
Volume (Year): IV (2006)
Issue (Month): 1 (February)
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Other versions of this item:
- Denis, CLAUDE & Jean, HINDRIKS, 2005. "Strategic Privatization and Regulation Policy in Mixed Markets," Discussion Papers (ECON - DÃ©partement des Sciences Economiques) 2005016, Université catholique de Louvain, Département des Sciences Economiques.
- CLAUDE, Denis & HINDRIKS, Jean, 2005. "Strategic privatization and regulation policy in mixed markets," CORE Discussion Papers 2005015, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
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