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Spatial price discrimination in a mixed duopoly input market

Author

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  • Heywood, John S.
  • Wang, Zerong
  • Ye, Guangliang

Abstract

We uniquely examine an upstream mixed duopoly engaging in spatial price discrimination across a continuum of downstream markets. The monopoly firms in those markets face elastic final demand creating double marginalization. The upstream public firm faces a cost disadvantage relative to its private rival that declines as it is partially privatized. We show that the fully public firm improves social welfare relative to a private duopoly when it is not overly inefficient and when differentiation is sufficiently large. We also show that whenever this is the case, there exists an optimal degree of partial privatization that better aligns the trade-off between production costs and pricing distortions.

Suggested Citation

  • Heywood, John S. & Wang, Zerong & Ye, Guangliang, 2023. "Spatial price discrimination in a mixed duopoly input market," Regional Science and Urban Economics, Elsevier, vol. 102(C).
    • Handle: RePEc:eee:regeco:v:102:y:2023:i:c:s0166046223000698
    DOI: 10.1016/j.regsciurbeco.2023.103934
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    More about this item

    Keywords

    Mixed duopoly; Input market; Spatial price discrimination;
    All these keywords.

    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L32 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Public Enterprises; Public-Private Enterprises
    • L52 - Industrial Organization - - Regulation and Industrial Policy - - - Industrial Policy; Sectoral Planning Methods

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