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Mixed Oligopoly and Entry

  • John Bennett

    ()

  • Manfredi La manna

    ()

We analyze a mixed oligopoly with free entry by private firms. It is assumed that a state-owned enterprise (SOE) maximizes an increasing function of output, subject to a break-even constraint. We first show that, because of instability, the industry cannot contain more than one SOE. Then we establish an irrelevance result: if the SOE's cost disadvantage relative to private firms is not too large, then aggregate output, aggreagte costs and welfare are the same with and without the SOE. However, for this range of cost disadvantage an SOE monopoly yields higher welfare. Implications for privatization policy are suggested.

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File URL: http://www.brunel.ac.uk/__data/assets/pdf_file/0003/342768/CEDI_12-01.pdf
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Paper provided by Centre for Economic Development and Institutions(CEDI), Brunel University in its series CEDI Discussion Paper Series with number 12-01.

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Length: 16 pages
Date of creation: Feb 2012
Date of revision:
Handle: RePEc:edb:cedidp:12-01
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  1. de Fraja, Giovanni & Delbono, Flavio, 1990. " Game Theoretic Models of Mixed Oligopoly," Journal of Economic Surveys, Wiley Blackwell, vol. 4(1), pages 1-17.
  2. Xavier Vives, 2001. "Oligopoly Pricing: Old Ideas and New Tools," MIT Press Books, The MIT Press, edition 1, volume 1, number 026272040x, June.
  3. Estrin, Saul & de Meza, David, 1995. "Unnatural monopoly," Journal of Public Economics, Elsevier, vol. 57(3), pages 471-488, July.
  4. Philippe De Donder & John E. Roemer, 2006. "Mised Oligopoly Equilibria When Firms' Objectives Are Endogenous," Cowles Foundation Discussion Papers 1581, Cowles Foundation for Research in Economics, Yale University.
  5. Massimo Florio, 2014. "The return of public enterprise," Working Papers 201401, Centre for Industrial Studies (CSIL).
  6. Yoshihiro Tomaru & Yasuhiko Nakamura & Masayuki Saito, 2011. "Strategic Managerial Delegation In A Mixed Duopoly With Capacity Choice: Partial Delegation Or Full Delegation," Manchester School, University of Manchester, vol. 79(4), pages 811-838, 07.
  7. Matsumura, Toshihiro, 1998. "Partial privatization in mixed duopoly," Journal of Public Economics, Elsevier, vol. 70(3), pages 473-483, December.
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