IDEAS home Printed from https://ideas.repec.org/a/kap/jeczfn/v112y2014i1p61-84.html
   My bibliography  Save this article

Optimal manipulation rules in a mixed oligopoly

Author

Listed:
  • Corrado Benassi
  • Alessandra Chirco
  • Marcella Scrimitore

Abstract

We study the optimal manipulation rules of a public firm’s objective function in a mixed oligopoly with imperfect product substitutability. We start with a baseline duopoly model and compare the solutions under quantity and price competition, and the way they are affected by product substitutability. This allows us to show that partial privatization, strategic delegation and other specific government’s commitments on the objective function of the public management can be looked at as special cases of these optimal rules, and to evaluate the viability of these policies under the two modes of competition. In this framework, we also discuss the equivalence between manipulation of the objective function and Stackelberg leadership. Since optimal manipulation rules change as new dimensions are added, we also derive the optimal rules under oligopoly, quadratic costs, and competition of international firms. This fairly general unified framework allows to discuss the impact of these factors on the government’s implementation policies of the optimal manipulation rules. Copyright Springer-Verlag Wien 2014

Suggested Citation

  • Corrado Benassi & Alessandra Chirco & Marcella Scrimitore, 2014. "Optimal manipulation rules in a mixed oligopoly," Journal of Economics, Springer, vol. 112(1), pages 61-84, May.
  • Handle: RePEc:kap:jeczfn:v:112:y:2014:i:1:p:61-84
    DOI: 10.1007/s00712-012-0332-2
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1007/s00712-012-0332-2
    Download Restriction: Access to full text is restricted to subscribers.

    File URL: https://libkey.io/10.1007/s00712-012-0332-2?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Dastidar, Krishnendu Ghosh, 1995. "On the Existence of Pure Strategy Bertrand Equilibrium," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 5(1), pages 19-32, January.
    2. 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.
    3. Arghya Ghosh & Manipushpak Mitra, 2008. "Comparing Bertrand and Cournot Outcomes in the Presence of Public Firms," Discussion Papers 2008-18, School of Economics, The University of New South Wales.
    4. repec:ebl:ecbull:v:12:y:2006:i:4:p:1-5 is not listed on IDEAS
    5. Kazuhiro Ohnishi, 2010. "Partial privatization in price-setting mixed duopoly," Economics Bulletin, AccessEcon, vol. 30(1), pages 309-314.
    6. Fumas, Vicente Salas, 1992. "Relative performance evaluation of management : The effects on industrial competition and risk sharing," International Journal of Industrial Organization, Elsevier, vol. 10(3), pages 473-489, September.
    7. White, Mark D., 2002. "Political manipulation of a public firm's objective function," Journal of Economic Behavior & Organization, Elsevier, vol. 49(4), pages 487-499, December.
    8. Barros, Fatima, 1995. "Incentive schemes as strategic variables: An application to a mixed duopoly," International Journal of Industrial Organization, Elsevier, vol. 13(3), pages 373-386, September.
    9. Arup Bose & Barnali Gupta, 2013. "Mixed markets in bilateral monopoly," Journal of Economics, Springer, vol. 110(2), pages 141-164, October.
    10. Vickers, John, 1985. "Delegation and the Theory of the Firm," Economic Journal, Royal Economic Society, vol. 95(380a), pages 138-147, Supplemen.
    11. Fershtman, Chaim & Judd, Kenneth L, 1987. "Equilibrium Incentives in Oligopoly," American Economic Review, American Economic Association, vol. 77(5), pages 927-940, December.
    12. Hiroaki Ino & Toshihiro Matsumura, 2010. "What role should public enterprises play in free-entry markets?," Journal of Economics, Springer, vol. 101(3), pages 213-230, November.
    13. Toshihiro Matsumura, 2003. "Endogenous Role in Mixed Markets: A Two-Production-Period Model," Southern Economic Journal, John Wiley & Sons, vol. 70(2), pages 403-413, October.
    14. Kenji Fujiwara, 2007. "Partial Privatization in a Differentiated Mixed Oligopoly," Journal of Economics, Springer, vol. 92(1), pages 51-65, September.
    15. John S. Heywood & Guangliang Ye, 2009. "Delegation in a mixed oligopoly: the case of multiple private firms," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 30(2), pages 71-82.
    16. repec:ebl:ecbull:v:30:y:2010:i:1:p:309-314 is not listed on IDEAS
    17. Miller, Nolan H & Pazgal, Amit I, 2001. "The Equivalence of Price and Quantity Competition with Delegation," RAND Journal of Economics, The RAND Corporation, vol. 32(2), pages 284-301, Summer.
    18. White, Mark D., 1996. "Mixed oligopoly, privatization and subsidization," Economics Letters, Elsevier, vol. 53(2), pages 189-195, November.
    19. Leonard Wang & Tai-Liang Chen, 2010. "Do cost efficiency gap and foreign competitors matter concerning optimal privatization policy at the free entry market?," Journal of Economics, Springer, vol. 100(1), pages 33-49, May.
    20. Matsumura, Toshihiro, 1998. "Partial privatization in mixed duopoly," Journal of Public Economics, Elsevier, vol. 70(3), pages 473-483, December.
    21. Toshihiro Matsumura & Osamu Kanda, 2005. "Mixed Oligopoly at Free Entry Markets," Journal of Economics, Springer, vol. 84(1), pages 27-48, February.
    22. 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.
    23. Basu, Kaushik, 1995. "Stackelberg equilibrium in oligopoly: An explanation based on managerial incentives," Economics Letters, Elsevier, vol. 49(4), pages 459-464, October.
    24. Ritika Jain & Rupayan Pal, 2012. "Mixed duopoly, cross-ownership and partial privatization," Journal of Economics, Springer, vol. 107(1), pages 45-70, September.
    25. 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.
    26. Pal, Debashis, 1998. "Endogenous timing in a mixed oligopoly," Economics Letters, Elsevier, vol. 61(2), pages 181-185, November.
    27. Kazuhiko Kato, 2013. "Optimal degree of privatization and the environmental problem," Journal of Economics, Springer, vol. 110(2), pages 165-180, October.
    28. Juan Bárcena-Ruiz & F. Casado-Izaga, 2012. "Location of public and private firms under endogenous timing of choices," Journal of Economics, Springer, vol. 105(2), pages 129-143, March.
    29. 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.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Planer-Friedrich, Lisa & Sahm, Marco, 2017. "Strategic corporate social responsibility," BERG Working Paper Series 124, Bamberg University, Bamberg Economic Research Group.
    2. Lisa Planer-Friedrich & Marco Sahm, 2017. "Strategic Corporate Social Responsibility," CESifo Working Paper Series 6506, CESifo.
    3. Kopel, Michael & Lamantia, Fabio, 2018. "The persistence of social strategies under increasing competitive pressure," Journal of Economic Dynamics and Control, Elsevier, vol. 91(C), pages 71-83.
    4. Marcella Scrimitore, 2014. "Profitability under Commitment in Cournot and Bertrand Mixed Markets," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 170(4), pages 684-703, December.
    5. Nakamura, Tamotsu & Takami, Hiroyuki, 2015. "Nash bargaining and partial privatization in mixed oligopoly," Economic Modelling, Elsevier, vol. 46(C), pages 315-321.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Toshihiro Matsumura & Makoto Okamura, 2015. "Competition and privatization policies revisited: the payoff interdependence approach," Journal of Economics, Springer, vol. 116(2), pages 137-150, October.
    2. Corrado Benassi & Alessandra Chirco & Marcella Scrimitore, 2011. "Optimal Manipulation Rules in a Mixed Duopoly," Working Paper series 43_11, Rimini Centre for Economic Analysis.
    3. Liu, Qian & Wang, Leonard F.S. & Chen, Charlie L., 2019. "Upstream privatization in mixed markets with retailer's efforts," The North American Journal of Economics and Finance, Elsevier, vol. 48(C), pages 338-345.
    4. Haraguchi, Junichi & Matsumura, Toshihiro, 2014. "Price versus quantity in a mixed duopoly with foreign penetration," Research in Economics, Elsevier, vol. 68(4), pages 338-353.
    5. 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.
    6. Junichi Haraguchi & Toshihiro Matsumura, 2016. "Cournot–Bertrand comparison in a mixed oligopoly," Journal of Economics, Springer, vol. 117(2), pages 117-136, March.
    7. Hiroaki Ino & Toshihiro Matsumura, 2010. "What role should public enterprises play in free-entry markets?," Journal of Economics, Springer, vol. 101(3), pages 213-230, November.
    8. Sato, Susumu & Matsumura, Toshihiro, 2019. "Shadow cost of public funds and privatization policies," The North American Journal of Economics and Finance, Elsevier, vol. 50(C).
    9. Leonard Wang & Tien-Der Han, 2015. "Better governance matters optimal privatization policy," Eurasian Economic Review, Springer;Eurasia Business and Economics Society, vol. 5(2), pages 189-206, December.
    10. Bouwe Dijkstra & Anuj Mathew & Arijit Mukherjee, 2015. "Privatization in the presence of foreign competition and strategic policies," Journal of Economics, Springer, vol. 114(3), pages 271-290, April.
    11. Sang-Ho Lee & Toshihiro Matsumura & Susumu Sato, 2018. "An analysis of entry-then-privatization model: welfare and policy implications," Journal of Economics, Springer, vol. 123(1), pages 71-88, January.
    12. Yoshihiro Tomaru & Masayuki Saito, 2010. "Mixed Duopoly, Privatization And Subsidization In An Endogenous Timing Framework," Manchester School, University of Manchester, vol. 78(1), pages 41-59, January.
    13. Shih-Jye Wu & Yang-Ming Chang & Hung-Yi Chen, 2016. "Imported inputs and privatization in downstream mixed oligopoly with foreign ownership," Canadian Journal of Economics, Canadian Economics Association, vol. 49(3), pages 1179-1207, August.
    14. Toshihiro Matsumura & Yoshihiro Tomaru, 2013. "Mixed duopoly, privatization, and subsidization with excess burden of taxation," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 46(2), pages 526-554, May.
    15. Rupayan Pal, 2010. "How much should you own? Cross-ownership and privatization," Indira Gandhi Institute of Development Research, Mumbai Working Papers 2010-015, Indira Gandhi Institute of Development Research, Mumbai, India.
    16. Manipushpak Mitra & Rupayan Pal & Arindam Paul & P. M. Sharada, 2020. "Equilibrium Coexistence of Public and Private Firms and the Plausibility of Price Competition," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 176(2), pages 217-242.
    17. Toshihiro Matsumura & Akira Ogawa, 2010. "On The Robustness Of Private Leadership In Mixed Duopoly," Australian Economic Papers, Wiley Blackwell, vol. 49(2), pages 149-160, June.
    18. Ming Hsin Lin & Toshihiro Matsumura, 2018. "Optimal Privatisation Policy under Private Leadership in Mixed Oligopolies," Arthaniti: Journal of Economic Theory and Practice, , vol. 17(1), pages 1-14, June.
    19. 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.
    20. João Correia-da-Silva & Joana Pinho, 2018. "Collusion in mixed oligopolies and the coordinated effects of privatization," Journal of Economics, Springer, vol. 124(1), pages 19-55, May.

    More about this item

    Keywords

    Mixed oligopoly; Strategic manipulation; Partial privatization; D43; L13; L32;
    All these keywords.

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • 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

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:kap:jeczfn:v:112:y:2014:i:1:p:61-84. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: . General contact details of provider: http://www.springer.com .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.