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Equilibrium Coexistence of Public and Private Firms and the Plausibility of Price Competition

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  • Manipushpak Mitra
  • Rupayan Pal
  • Arindam Paul
  • P. M. Sharada

Abstract

We consider a differentiated product duopoly where a regulated firm competes with a private firm. The instrument of regulation is the level of privatization. First, the regulator determines the level of privatization to maximize social welfare. Thereafter, both firms endogenously choose the mode of competition (thatis, whether to compete in price or quantity). Finally, the two firms compete in the market. Under a very general demand specification, we show that when the products are imperfect substitutes (complements), public (strictly partially private) and private firms coexist. Moreover, in the second stage, the firms competein prices.

Suggested Citation

  • 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.
  • Handle: RePEc:mhr:jinste:urn:doi:10.1628/jite-2019-0041
    DOI: 10.1628/jite-2019-0041
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    More about this item

    Keywords

    partially private firm; price (Bertrand) competition; quantity (Cournot)competition;
    All these keywords.

    JEL classification:

    • D4 - Microeconomics - - Market Structure, Pricing, and Design
    • D6 - Microeconomics - - Welfare Economics
    • H4 - Public Economics - - Publicly Provided Goods
    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • L2 - Industrial Organization - - Firm Objectives, Organization, and Behavior

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