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Inefficient but Robust Public Leadership

Author

Listed:
  • Toshihiro Matsumura

    (The University of Tokyo)

  • Akira Ogawa

    (International Christian University)

Abstract

We investigate endogenous timing in a mixed duopoly in a differentiated product market. We find that private leadership is better than public leadership from a social welfare perspective if the private firm is domestic, regardless of the degree of product differentiation. Nevertheless, the public leadership equilibrium is risk-dominant, and it is thus robust if the degree of product differentiation is high. We also find that regardless of the degree of product differentiation, the public leadership equilibrium is risk-dominant if the private firm is foreign. These results may explain the recent revival of public financial institutions in Japan.

Suggested Citation

  • Toshihiro Matsumura & Akira Ogawa, 2017. "Inefficient but Robust Public Leadership," Journal of Industry, Competition and Trade, Springer, vol. 17(4), pages 387-398, December.
  • Handle: RePEc:kap:jincot:v:17:y:2017:i:4:d:10.1007_s10842-017-0248-1
    DOI: 10.1007/s10842-017-0248-1
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    Cited by:

    1. 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.
    2. Akio Kawasaki, 2021. "Optimal number of privatised products in a differentiated mixed oligopoly with free market entry," Australian Economic Papers, Wiley Blackwell, vol. 60(4), pages 651-663, December.
    3. Haraguchi, Junichi & Matsumura, Toshihiro, 2018. "Government-leading welfare-improving collusion," International Review of Economics & Finance, Elsevier, vol. 56(C), pages 363-370.
    4. Kosuke Hirose & Toshihiro Matsumura, 2019. "Comparing welfare and profit in quantity and price competition within Stackelberg mixed duopolies," Journal of Economics, Springer, vol. 126(1), pages 75-93, January.
    5. Shahryar Gheibi, 2020. "Low-Cost-Driven Leadership: A Theory for Price Dispersion in Competitive Markets," International Journal of Business and Economics, School of Management Development, Feng Chia University, Taichung, Taiwan, vol. 19(1), pages 61-76, June.
    6. Akio Kawasaki & Takao Ohkawa & Makoto Okamura, 2020. "Endogenous timing game in a mixed duopoly with partial foreign ownership and asymmetric increasing marginal costs," Australian Economic Papers, Wiley Blackwell, vol. 59(2), pages 71-87, June.
    7. 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.
    8. Kresimir Zigic & Jiri Strelicky & Michael Kunin, 2015. "Modeling Software Piracy Protection: Monopoly versus Duopoly," CERGE-EI Working Papers wp551, The Center for Economic Research and Graduate Education - Economics Institute, Prague.

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    More about this item

    Keywords

    Public financial institutions; Differentiated products; Risk dominance; Stackelberg;
    All these keywords.

    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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