We study firms' adoption of flexible versus dedicated technologies in the context of a mixed versus a private duopoly with product differentiation. The flexible technology allows a firm to become multiproduct or multimarket without bearing additional costs. We find that a configuration where both firms adopt flexible technologies is more likely to arise in equilibrium in the private duopoly. A similar result occurs when both firms use a dedicated technology in the case of either almost independent products or products that are close substitutes. Privatization of the public firm is socially beneficial only in limited circumstances.
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Paper provided by Department of Economics, Loughborough University in its series Discussion Paper Series with number
2006_1.
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