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Mixed Oligopoly at Free Entry Markets

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  • Toshihiro Matsumura

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  • Osamu Kanda

Abstract

We investigate the optimal behavior of a public firm in a mixed market involving private firms and one public firm. Existing works show that welfare-maximizing behavior by the public firm is suboptimal when the number of firms is given exogenously. We allow free entry of private firms and find that, in contrast to the case with the fixed number of firms, welfare-maximizing behavior by the public firm is always optimal in mixed markets. Furthermore, we find that mixed markets are better than pure markets involving no public firm if and only if the public firm earns nonnegative profits. Copyright Springer-Verlag Wien 2005

Suggested Citation

  • Toshihiro Matsumura & Osamu Kanda, 2005. "Mixed Oligopoly at Free Entry Markets," Journal of Economics, Springer, vol. 84(1), pages 27-48, February.
  • Handle: RePEc:kap:jeczfn:v:84:y:2005:i:1:p:27-48 DOI: 10.1007/s00712-004-0098-z
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    References listed on IDEAS

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    More about this item

    Keywords

    mixed oligopoly; privatization; entry restrictions; H42; L13; C72;

    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
    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games

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