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Strategic Privatization and Regulation Policy in Mixed Markets


  • Denis, CLAUDE
  • Jean, HINDRIKS


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 with profit concern. It is shown that partial privatization improves welfare with quantity competion when goods are subsitutes, and with price competition when goods are complements. However full privatization (complete delegation to private manager) can never be optimal. It is also 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.

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  • Denis, CLAUDE & Jean, HINDRIKS, 2005. "Strategic Privatization and Regulation Policy in Mixed Markets," Discussion Papers (ECON - Département des Sciences Economiques) 2005016, Université catholique de Louvain, Département des Sciences Economiques.
  • Handle: RePEc:ctl:louvec:2005016

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    References listed on IDEAS

    1. 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 319-328, August.
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    5. 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.
    6. repec:ebl:ecbull:v:12:y:2002:i:1:p:1-6 is not listed on IDEAS
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    11. 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.
    12. White, Mark D., 1996. "Mixed oligopoly, privatization and subsidization," Economics Letters, Elsevier, vol. 53(2), pages 189-195, November.
    13. De Fraja, Giovanni, 1993. "Productive efficiency in public and private firms," Journal of Public Economics, Elsevier, vol. 50(1), pages 15-30, January.
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    Cited by:

    1. Denis Claude & Mabel Tidball, 2010. "Efficiency inducing taxation for polluting oligopolists: the irrelevance of privatization," Economics Bulletin, AccessEcon, vol. 30(4), pages 2946-2954.
    2. Carlo Capuano & Giuseppe De Feo, 2009. "On Public Inefficiencies in a Mixed Duopoly," Working Papers 0916, University of Strathclyde Business School, Department of Economics.
    3. Heywood, John S. & McGinty, Matthew, 2011. "Cross-border mergers in a mixed oligopoly," Economic Modelling, Elsevier, vol. 28(1-2), pages 382-389, January.
    4. Amerighi, Oscar & De Feo, Giuseppe, 2010. "On the FDI-attracting property of privatizatio," SIRE Discussion Papers 2010-34, Scottish Institute for Research in Economics (SIRE).
    5. Koji Okuguchi, 2012. "General Analysis of Cournot Mixed Oligopoly with Partial Privatization," Eurasian Economic Review, Springer;Eurasia Business and Economics Society, vol. 2(1), pages 48-62, June.
    6. 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.
    7. Susumu Cato & Toshihiro Matsumura, 2013. "Long-Run Effects of Tax Policies in a Mixed Market," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 69(2), pages 215-240, June.

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