Strategic Privatization and Regulation Policy in Mixed Markets
AbstractIn this paper we consider mixed oligopoly markets for differentiated goods where private and public firms compete either in prices or quantities. We then study 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 competion when goods are subsitutes, 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 the public firm can make more profit than the private firm in equilibrium, and that this possibility is more likely under quantity competition. Turning to market regulation policy, we find : (i) that public and private firms should be taxed the same; and (ii) that price regulation is better than quantity regulation.
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Bibliographic InfoPaper provided by Université catholique de Louvain, Département des Sciences Economiques in its series Discussion Papers (ECON - Département des Sciences Economiques) with number 2005016.
Date of creation: 01 Jan 2005
Date of revision:
Other versions of this item:
- J Hindriks & D Claude, 2006. "Strategic Privatization and Regulation Policy in Mixed Markets," The IUP Journal of Managerial Economics, IUP Publications, vol. 0(1), pages 7-26, February.
- 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).
- NEP-ALL-2005-05-29 (All new papers)
- NEP-COM-2005-05-29 (Industrial Competition)
- NEP-MIC-2005-05-29 (Microeconomics)
- NEP-REG-2005-05-29 (Regulation)
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