Mixing Private and Public Service Providers and Specialization
AbstractWe analyze the reform of public sector welfare services such as education. In this paper we compare a mix of private and a public service provider with full privatization. In both cases the suppliers specialize in serving particular customer types. In the mixed institution the government sets the public fee such that service quality does not deteriorate and the price of the private supplier is anchored at comparatively low level. Under full privatization, however, prices escalate to the highest possible level. As a consequence, consumer welfare is higher with a mixed institution – unless the proportion of low-cost customers is high. The mixed institution can also accommodate wealth constraints of customers to some extent.
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Bibliographic InfoPaper provided by Department of Economics, University of Bristol, UK in its series The Centre for Market and Public Organisation with number 05/131.
Length: 40 pages
Date of creation: Sep 2005
Date of revision:
private and public suppliers; specialization; welfare services; mixed institutions;
Find related papers by JEL classification:
- D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
- H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government
- I21 - Health, Education, and Welfare - - Education - - - Analysis of Education
- L33 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Comparison of Public and Private Enterprise and Nonprofit Institutions; Privatization; Contracting Out
This paper has been announced in the following NEP Reports:
- NEP-ALL-2005-12-09 (All new papers)
- NEP-MKT-2005-12-09 (Marketing)
- NEP-PBE-2005-12-09 (Public Economics)
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