Should Public Sectors Be Complements of Private Sectors?
AbstractWe discuss competition between high-quality private service providers that maximize their own profits and a low-quality public service provider that maximizes social surplus. Two heterogeneous consumer groups exist: those who demand only high-quality services and those who care little whether services are high- or low-quality. The setting reflects the fact that some consumers feel dissatisfaction with public service providers. We show that, under certain conditions, social welfare is smaller when there is a public service provider than when there is not. The result holds even though the efficiency of the public service is equal to that of the private services.
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Bibliographic InfoArticle provided by Mohr Siebeck, Tübingen in its journal Journal of Institutional and Theoretical Economics.
Volume (Year): 168 (2012)
Issue (Month): 4 (December)
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Find related papers by JEL classification:
- H42 - Public Economics - - Publicly Provided Goods - - - Publicly Provided Private Goods
- L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
- I12 - Health, Education, and Welfare - - Health - - - Health Production
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- Kangsik, Choi, 2011. "Cournot and Bertrand competition with asymmetric costs in a mixed duopoly," MPRA Paper 34100, University Library of Munich, Germany.
- Kangsik, Choi, 2012. "Cournot and Bertrand competition with asymmetric costs in a mixed duopoly revisited," MPRA Paper 37704, University Library of Munich, Germany, revised 28 Mar 2012.
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