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What role should public enterprises play in free-entry markets?

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Author Info

  • Hiroaki Ino

    ()
    (Kwansei Gakuin University)

  • Toshihiro Matsumura

    ()
    (University of Tokyo)

Abstract

We investigate a desirable role of public enterprise in mixed oligopoly in free-entry markets. We compare the following three cases: (i) a public firm produces before private firms (public leadership), (ii) all firms produce simultaneously (Cournot), (iii) a public firm produces after private firms (private leadership). We find that private leadership is best and public leadership is worst, in contrast to the cases without entries and exits of private firms. We also investigate the welfare implication of privatization. We find that some important results shown by existing works do not hold under private leadership.

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File URL: http://192.218.163.163/RePEc/pdf/kgdp46.pdf
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Bibliographic Info

Paper provided by School of Economics, Kwansei Gakuin University in its series Discussion Paper Series with number 46.

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Length: 23 pages
Date of creation: Jun 2009
Date of revision: Jun 2009
Handle: RePEc:kgu:wpaper:46

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Keywords: free-entry market; Stackelberg; Cournot; mixed oligopoly; commitment;

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References

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Citations

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Cited by:
  1. Ming Lin & Toshihiro Matsumura, 2012. "Presence of foreign investors in privatized firms and privatization policy," Journal of Economics, Springer, vol. 107(1), pages 71-80, September.
  2. Marcella Scrimitore, 2012. "Quantity Competition vs. Price Competition under Optimal Subsidy in a Mixed Duopoly," EERI Research Paper Series EERI_RP_2012_15, Economics and Econometrics Research Institute (EERI), Brussels.
  3. Kazuhiko Kato, 2013. "Optimal degree of privatization and the environmental problem," Journal of Economics, Springer, vol. 110(2), pages 165-180, October.
  4. Tamás Balogh & Attila Tasnádi, 2012. "Does timing of decisions in a mixed duopoly matter?," Journal of Economics, Springer, vol. 106(3), pages 233-249, July.
  5. Bennett, John & La Manna, Manfredi, 2012. "Mixed oligopoly, public firm behavior, and free private entry," Economics Letters, Elsevier, vol. 117(3), pages 767-769.
  6. Wang, Leonard F.S. & Chen, Tai-Liang, 2011. "Mixed oligopoly, optimal privatization, and foreign penetration," Economic Modelling, Elsevier, vol. 28(4), pages 1465-1470, July.
  7. Matsumura, Toshihiro & Ogawa, Akira, 2014. "Inefficient but robust public leadership," MPRA Paper 56539, University Library of Munich, Germany.
  8. Kresimir Zigic, 2008. "Stackelberg Leadership with Product Differentiation and Endogenous Entry: Some Comparative Static and Limiting Results," CERGE-EI Working Papers wp369, The Center for Economic Research and Graduate Education - Economic Institute, Prague.
  9. Etro, Federico, 2013. "Advertising and search engines. A model of leadership in search advertising," Research in Economics, Elsevier, vol. 67(1), pages 25-38.

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