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Mixed oligopoly, vertical product differentiation and fixed qualitydependent costs

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  • Stefan Lutz
  • Mario Pezzino

Abstract

A private and a public firm face fixed quality-dependent costs of production and compete first in quality and then either in prices or in quantities. In the long run the public firm targets welfare maximization whereas the private firm maximizes profits. In the short run both firms compete in prices or quantities to maximize profits. Mixed competition is always socially desirable compared to a private duopoly regardless of the type of competition in the short run and the equilibrium quality ranking. In addition, mixed competition seems to be a more efficient regulatory instrument than the adoption of a minimum quality standard.
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Suggested Citation

  • Stefan Lutz & Mario Pezzino, 2010. "Mixed oligopoly, vertical product differentiation and fixed qualitydependent costs," The School of Economics Discussion Paper Series 1015, Economics, The University of Manchester.
  • Handle: RePEc:man:sespap:1015
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    File URL: http://hummedia.manchester.ac.uk/schools/soss/economics/discussionpapers/EDP-1015.pdf
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    References listed on IDEAS

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    Cited by:

    1. Levin, Mark & Busygin, V. & Popova, E.V., 2016. "Development and Analysis of Strategies for Selecting Models of Mixed Market Participants," Working Papers 3054, Russian Presidential Academy of National Economy and Public Administration.
    2. WATANABE Mariko, 2015. "Identifying Competition Neutrality of SOEs in China," Discussion papers 15134, Research Institute of Economy, Trade and Industry (RIETI).

    More about this item

    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L33 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Comparison of Public and Private Enterprise and Nonprofit Institutions; Privatization; Contracting Out
    • L50 - Industrial Organization - - Regulation and Industrial Policy - - - General
    • H44 - Public Economics - - Publicly Provided Goods - - - Publicly Provided Goods: Mixed Markets

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