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Endogenous public and private leadership with diverging social and private marginal costs

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  • Junichi Haraguchi
  • Toshihiro Matsumura

Abstract

We investigate endogenous timing in a mixed duopoly with price competition and different social versus private marginal costs. We find that any equilibrium timing patterns—Bertrand, Stackelberg with private leadership, Stackelberg with public leadership, and multiple Stackelberg equilibria—emerge. When the foreign ownership share in a private firm is less than 50%, public leadership is more likely to emerge than private leadership. Conversely, private leadership can emerge in a unique equilibrium when the foreign ownership share in a private firm is large. These results may explain recent policy changes in public financial institutions in Japan. We also find there is a nonmonotonic relationship between the welfare advantage of public and private leadership and the difference between social and private marginal costs for a private firm. A nonmonotonic relationship does not emerge in profit ranking. Similar results are obtained under quantity competition, although some properties are different.

Suggested Citation

  • Junichi Haraguchi & Toshihiro Matsumura, 2020. "Endogenous public and private leadership with diverging social and private marginal costs," Manchester School, University of Manchester, vol. 88(5), pages 699-730, September.
  • Handle: RePEc:bla:manchs:v:88:y:2020:i:5:p:699-730
    DOI: 10.1111/manc.12320
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    Cited by:

    1. Haraguchi, Junichi & Matsumura, Toshihiro, 2021. "Market Concentration, Privatization Policies, and Heterogeneity among Private Firms in Mixed Oligopolies," MPRA Paper 106975, University Library of Munich, Germany.

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    More about this item

    JEL classification:

    • H42 - Public Economics - - Publicly Provided Goods - - - Publicly Provided Private Goods
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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