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Mixed Oligopoly and Entry

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  • John Bennett
  • Manfredi La manna

Abstract

We analyze a mixed oligopoly with free entry by private firms. It is assumed that a state-owned enterprise (SOE) maximizes an increasing function of output, subject to a break-even constraint. We first show that, because of instability, the industry cannot contain more than one SOE. Then we establish an irrelevance result: if the SOE's cost disadvantage relative to private firms is not too large, then aggregate output, aggreagte costs and welfare are the same with and without the SOE. However, for this range of cost disadvantage an SOE monopoly yields higher welfare. Implications for privatization policy are suggested.

Suggested Citation

  • John Bennett & Manfredi La manna, 2012. "Mixed Oligopoly and Entry," CEDI Discussion Paper Series 12-01, Centre for Economic Development and Institutions(CEDI), Brunel University.
    • Handle: RePEc:edb:cedidp:12-01
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    References listed on IDEAS

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    2. De Donder, Philippe & Roemer, John E., 2009. "Mixed oligopoly equilibria when firms' objectives are endogenous," International Journal of Industrial Organization, Elsevier, vol. 27(3), pages 414-423, May.
    3. Matsumura, Toshihiro, 1998. "Partial privatization in mixed duopoly," Journal of Public Economics, Elsevier, vol. 70(3), pages 473-483, December.
    4. Yoshihiro Tomaru & Yasuhiko Nakamura & Masayuki Saito, 2011. "Strategic Managerial Delegation In A Mixed Duopoly With Capacity Choice: Partial Delegation Or Full Delegation," Manchester School, University of Manchester, vol. 79(4), pages 811-838, July.
    5. de Fraja, Giovanni & Delbono, Flavio, 1990. "Game Theoretic Models of Mixed Oligopoly," Journal of Economic Surveys, Wiley Blackwell, vol. 4(1), pages 1-17.
    6. Massimo Florio, 2014. "The return of public enterprise," Working Papers 201401, CSIL Centre for Industrial Studies.
    7. Xavier Vives, 2001. "Oligopoly Pricing: Old Ideas and New Tools," MIT Press Books, The MIT Press, edition 1, volume 1, number 026272040x, December.
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    Citations

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    Cited by:

    1. Tai-Liang Chen, 2017. "Privatization and efficiency: a mixed oligopoly approach," Journal of Economics, Springer, vol. 120(3), pages 251-268, April.
    2. Bian, Junsong & Guo, Xiaolei & Li, Kevin W., 2015. "Distribution channel strategies in a mixed market," International Journal of Production Economics, Elsevier, vol. 162(C), pages 13-24.
    3. Ziad Ghandour & Odd Rune Straume, 2022. "Optimal funding coverage in a mixed oligopoly with quality competition and price regulation," Journal of Economics, Springer, vol. 136(3), pages 201-225, August.
    4. Paolo Castelnovo, 2016. "State-invested enterprises in the European telecommunications industry: Are they competitive players?," ECONOMIA PUBBLICA, FrancoAngeli Editore, vol. 2016(3), pages 219-240.
    5. Jorge Fernández-Ruiz, 2020. "Mixed duopoly in a Hotelling framework with cubic transportation costs," Letters in Spatial and Resource Sciences, Springer, vol. 13(2), pages 133-149, August.
    6. Sumi Cho & Sang-Ho Lee, 2017. "Subsidization Policy on the Social Enterprise for the Underprivileged," Korean Economic Review, Korean Economic Association, vol. 33, pages 153-178.
    7. Sang‐Ho Lee & Timur K. Muminov, 2021. "R&D Information sharing in a mixed duopoly and incentive subsidy for research joint venture competition," Bulletin of Economic Research, Wiley Blackwell, vol. 73(2), pages 154-170, April.
    8. Cho, Sumi & Lee, Sang-Ho, 2017. "Endogenous Private Leadership under Subsidy Policy on the Social Enterprises," MPRA Paper 83431, University Library of Munich, Germany.
    9. Bennett, John & La Manna, Manfredi, 2012. "Mixed oligopoly, public firm behavior, and free private entry," Economics Letters, Elsevier, vol. 117(3), pages 767-769.
    10. Leonard Wang & Chu Hsu & Jen Lee, 2014. "Do Partial Cross Ownership and Budget Constraints Matter for Privatization Policy?," Journal of Industry, Competition and Trade, Springer, vol. 14(4), pages 519-529, December.
    11. Wang, Leonard F.S. & Lee, Jen-yao & Hsu, Chu-chuan, 2014. "Privatization, foreign competition, and social efficiency of free entry," International Review of Economics & Finance, Elsevier, vol. 31(C), pages 138-147.
    12. Quan Dong & Juan Carlos Bàrcena-Ruiz, 2017. "Privatization and Entry with Switching Costs," Manchester School, University of Manchester, vol. 85(4), pages 491-510, July.
    13. Arup Bose & Debashis Pal & David E. M. Sappington, 2014. "The impact of public ownership in the lending sector," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 47(4), pages 1282-1311, November.

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