Strategic privatization and regulation policy in mixed markets
In this paper we consider mixed oligopoly markets for differentiated goods where private and public firms compete either in prices or quantities. We then study the welfare effect of privatization interpreted as partial strategic delegation of the public firm to a private manager withprofit concern. It is shown that partial privatization improves welfare with quantity competition when goods are substitutes, and with price competition when goods are complements. However full privatization (complete delegation to private manager) can never be optimal. It isalso shown that the public firm can make more profit than the private firm in equilibrium, and that this possibility is more likely under quantity competition. Turning to market regulation policy, we find: (i) that public and private firms should be taxed the same; and (ii) that price regulation is better than quantity regulation.
|Date of creation:||00 Feb 2005|
|Date of revision:|
|Contact details of provider:|| Postal: |
Fax: +32 10474304
Web page: http://www.uclouvain.be/core
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Fershtman, Chaim & Judd, Kenneth L, 1987.
"Equilibrium Incentives in Oligopoly,"
American Economic Review,
American Economic Association, vol. 77(5), pages 927-40, December.
- Hugo Sonnenschein, 1968. "The Dual of Duopoly Is Complementary Monopoly: or, Two of Cournot's Theories Are One," Journal of Political Economy, University of Chicago Press, vol. 76, pages 316.
- Cremer, H. & Marchand, M. & Thisse, J.-F., 1987.
"The public firm as an instrument for regulating an oligopolistic market,"
CORE Discussion Papers
1987010, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Cremer, Helmuth & Marchand, Maurice & Thisse, Jacques-Francois, 1989. "The Public Firm as an Instrument for Regulating an Oligopolistic Market," Oxford Economic Papers, Oxford University Press, vol. 41(2), pages 283-301, April.
- CREMER, Helmuth & MARCHAND, Maurice & THISSE, Jacques-François, . "The public firm as an instrument for regulating an oligopolistic market," CORE Discussion Papers RP -832, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- repec:ebl:ecbull:v:12:y:2002:i:1:p:1-6 is not listed on IDEAS
- Nirvikar Singh & Xavier Vives, 1984. "Price and Quantity Competition in a Differentiated Duopoly," RAND Journal of Economics, The RAND Corporation, vol. 15(4), pages 546-554, Winter.
- Vickers, John, 1985. "Delegation and the Theory of the Firm," Economic Journal, Royal Economic Society, vol. 95(380a), pages 138-47, Supplemen.
- Joanna Poyago-Theotoky, 2001. "Mixed oligopoly, subsidization and the order of firms' moves: an irrelevance result," Economics Bulletin, AccessEcon, vol. 12(3), pages 1-5.
- Bulow, Jeremy I & Geanakoplos, John D & Klemperer, Paul D, 1985. "Multimarket Oligopoly: Strategic Substitutes and Complements," Journal of Political Economy, University of Chicago Press, vol. 93(3), pages 488-511, June.
- de Fraja, Giovanni & Delbono, Flavio, 1989. "Alternative Strategies of a Public Enterprise in Oligopoly," Oxford Economic Papers, Oxford University Press, vol. 41(2), pages 302-11, April.
- John Vickers & George Yarrow, 1988. "Privatization: An Economic Analysis," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262720116, June.
- Cremer, Helmuth & Marchand, Maurice & Thisse, Jacques-Francois, 1991.
"Mixed oligopoly with differentiated products,"
International Journal of Industrial Organization,
Elsevier, vol. 9(1), pages 43-53, March.
- Richard G. Harris & Elmer G. Wiens, 1980. "Government Enterprise: An Instrument for the Internal Regulation of Industry," Canadian Journal of Economics, Canadian Economics Association, vol. 13(1), pages 125-32, February.
- De Fraja, Giovanni, 1993. "Productive efficiency in public and private firms," Journal of Public Economics, Elsevier, vol. 50(1), pages 15-30, January.
- Matsumura, Toshihiro, 1998. "Partial privatization in mixed duopoly," Journal of Public Economics, Elsevier, vol. 70(3), pages 473-483, December.
- White, Mark D., 1996. "Mixed oligopoly, privatization and subsidization," Economics Letters, Elsevier, vol. 53(2), pages 189-195, November.
- Fershtman, Chaim, 1985. "Managerial incentives as a strategic variable in duopolistic environment," International Journal of Industrial Organization, Elsevier, vol. 3(2), pages 245-253, June.
- Fershtman, Chaim, 1990. "The Interdependence between Ownership Status and Market Structure: The Case of Privatization," Economica, London School of Economics and Political Science, vol. 57(227), pages 319-28, August.
When requesting a correction, please mention this item's handle: RePEc:cor:louvco:2005015. 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: (Alain GILLIS)
If references are entirely missing, you can add them using this form.