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Undesirable competition


  • Wang, Leonard F.S.
  • Mukherjee, Arijit


We show that the entry of private profit-maximising firms makes the consumers worse off compared to having a nationalised monopoly. Such entry increases the nationalised firm’s profit, industry profit, and social welfare, at the expense of the consumers. Our result is important for competition policy.

Suggested Citation

  • Wang, Leonard F.S. & Mukherjee, Arijit, 2012. "Undesirable competition," Economics Letters, Elsevier, vol. 114(2), pages 175-177.
  • Handle: RePEc:eee:ecolet:v:114:y:2012:i:2:p:175-177 DOI: 10.1016/j.econlet.2011.09.021

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    References listed on IDEAS

    1. Hamilton, Jonathan H. & Slutsky, Steven M., 1990. "Endogenous timing in duopoly games: Stackelberg or cournot equilibria," Games and Economic Behavior, Elsevier, vol. 2(1), pages 29-46, March.
    2. Cremer, Helmuth & Marchand, Maurice & Thisse, Jacques-Francois, 1989. "The Public Firm as an Instrument for Regulating an Oligopolistic Market," Oxford Economic Papers, Oxford University Press, vol. 41(2), pages 283-301, April.
    3. Lu, Yuanzhu, 2007. "Endogenous timing in a mixed oligopoly: Another forgotten equilibrium," Economics Letters, Elsevier, vol. 94(2), pages 226-227, February.
    4. Jerry Hausman & Ephraim Leibtag, 2007. "Consumer benefits from increased competition in shopping outlets: Measuring the effect of Wal-Mart," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 22(7), pages 1157-1177.
    5. Gans, Joshua S & Quiggin, John, 2003. "A Technological and Organisational Explanation for the Size Distribution of Firms," Small Business Economics, Springer, vol. 21(3), pages 243-256, November.
    6. Maarten C. W. Janssen & José Luis Moraga-González, 2004. "Strategic Pricing, Consumer Search and the Number of Firms," Review of Economic Studies, Oxford University Press, vol. 71(4), pages 1089-1118.
    7. Jacques, Armel, 2004. "Endogenous timing in a mixed oligopoly: a forgotten equilibrium," Economics Letters, Elsevier, vol. 83(2), pages 147-148, May.
    8. Rosenthal, Robert W, 1980. "A Model in Which an Increase in the Number of Sellers Leads to a Higher Price," Econometrica, Econometric Society, vol. 48(6), pages 1575-1579, September.
    9. Fjell, Kenneth & Heywood, John S, 2002. "Public Stackelberg Leadership in a Mixed Oligopoly with Foreign Firms," Australian Economic Papers, Wiley Blackwell, vol. 41(3), pages 267-281, September.
    10. Pal, Debashis, 1998. "Endogenous timing in a mixed oligopoly," Economics Letters, Elsevier, vol. 61(2), pages 181-185, November.
    11. Wen, Mei & Sasaki, Dan, 2001. "Would Excess Capacity in Public Firms Be Socially Optimal?," The Economic Record, The Economic Society of Australia, vol. 77(238), pages 283-290, September.
    12. Yongmin Chen & Michael H. Riordan, 2008. "Price-increasing competition," RAND Journal of Economics, RAND Corporation, vol. 39(4), pages 1042-1058.
    13. Pal, Debashis & Sarkar, Jyotirmoy, 2001. "A Stackelberg Oligopoly with Nonidentical Firms," Bulletin of Economic Research, Wiley Blackwell, vol. 53(2), pages 127-134, April.
    14. de Fraja, Giovanni & Delbono, Flavio, 1989. "Alternative Strategies of a Public Enterprise in Oligopoly," Oxford Economic Papers, Oxford University Press, vol. 41(2), pages 302-311, April.
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    Cited by:

    1. Matsumura, Toshihiro & Sunada, Takeaki, 2013. "Advertising competition in a mixed oligopoly," Economics Letters, Elsevier, vol. 119(2), pages 183-185.
    2. Soumyananda Dinda & Arijit Mukherjee, 2014. "A Note on the Adverse Effect of Competition on Consumers," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 16(1), pages 157-163, February.
    3. Hirose, Kosuke & Matsumura, Toshihiro, 2017. "Comparing Welfare and Profit in Quantity and Price Competition within Stackelberg Mixed Duopolies," MPRA Paper 77700, University Library of Munich, Germany.
    4. Chen, Yi-Wen & Yang, Ya-Po & Wang, Leonard F.S. & Wu, Shih-Jye, 2014. "Technology licensing in mixed oligopoly," International Review of Economics & Finance, Elsevier, vol. 31(C), pages 193-204.
    5. repec:kap:jincot:v:17:y:2017:i:4:d:10.1007_s10842-017-0248-1 is not listed on IDEAS
    6. Gelves, Juan Alejandro & Heywood, John S., 2016. "How does a mixed ownership firm license a patent?," Economic Modelling, Elsevier, vol. 59(C), pages 278-284.
    7. Wang, Leonard F.S. & Lee, Jen-yao, 2013. "Foreign penetration and undesirable competition," Economic Modelling, Elsevier, vol. 30(C), pages 729-732.
    8. repec:kap:revind:v:51:y:2017:i:1:d:10.1007_s11151-016-9541-0 is not listed on IDEAS
    9. Toshihiro Matsumura & Akira Ogawa, 2017. "Inefficient but Robust Public Leadership," Journal of Industry, Competition and Trade, Springer, vol. 17(4), pages 387-398, December.

    More about this item


    Competition; Consumer surplus; Nationalised firm;

    JEL classification:

    • L32 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Public Enterprises; Public-Private Enterprises
    • L44 - Industrial Organization - - Antitrust Issues and Policies - - - Antitrust Policy and Public Enterprise, Nonprofit Institutions, and Professional Organizations
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • H00 - Public Economics - - General - - - General
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection


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