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Mixed oligopoly, vertical product differentiation and fixed quality-dependent costs

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  • Stefan Lutz

    ()

  • Mario Pezzino

    ()

Abstract

A private and a public firm face fixed quality-dependent costs of production and compete first in quality and then either in prices or in quantities. In the long run the public firm targets welfare maximization whereas the private firm maximizes profits. In the short run both firms compete in prices or quantities to maximize profits. Mixed competition is always socially desirable compared to a private duopoly regardless of the type of competition in the short run and the equilibrium quality ranking. In addition, mixed competition seems to be a more efficient regulatory instrument than the adoption of a minimum quality standard.

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Bibliographic Info

Paper provided by ICER - International Centre for Economic Research in its series ICER Working Papers with number 08-2010.

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Length: 26 pages
Date of creation: May 2010
Date of revision:
Handle: RePEc:icr:wpicer:08-2010

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Keywords: vertical product differentiation; mixed oligopoly; quality; price and quantity competition;

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  1. de Fraja, Giovanni & Delbono, Flavio, 1989. "Alternative Strategies of a Public Enterprise in Oligopoly," Oxford Economic Papers, Oxford University Press, vol. 41(2), pages 302-11, April.
  2. Pedro Cantos-Sánchez & Rafael Moner-Colonques, 2006. "Mixed Oligopoly, Product Differentiation And Competition For Public Transport Services," Manchester School, University of Manchester, vol. 74(3), pages 294-313, 06.
  3. Joanna Poyago-Thotoky, 2003. "Optimal Environmental Taxation, R&D Subsidization and the Role of Market Conduct," Finnish Economic Papers, Finnish Economic Association, vol. 16(1), pages 15-26, Spring.
  4. de Fraja, Giovanni & Delbono, Flavio, 1990. " Game Theoretic Models of Mixed Oligopoly," Journal of Economic Surveys, Wiley Blackwell, vol. 4(1), pages 1-17.
  5. De Fraja, Giovanni, 1993. "Unions and Wages in Public and Private Firms: A Game-Theoretic Analysis," Oxford Economic Papers, Oxford University Press, vol. 45(3), pages 457-69, July.
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