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Mixed oligopoly with consumer-friendly public firms

Author

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  • Roy Chowdhury, Prabal

Abstract

We consider a mixed oligopoly with a public firm that maximizes the sum of its own profits and consumers' surplus. We characterize the unique pure strategy equilibrium and show that as long as the cost function is not ``too concave'', privatization reduces welfare. We find that while the first best cannot be implemented using a tax/subsidy policy that is the same for all firms, a budget-balancing policy that involves a tax on the public firm, coupled with subsidies to the private firms, can do so. Further, the optimal tax/subsidy policy is critically dependent on whether there is privatization or not.

Suggested Citation

  • Roy Chowdhury, Prabal, 2007. "Mixed oligopoly with consumer-friendly public firms," MPRA Paper 4255, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:4255
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    File URL: https://mpra.ub.uni-muenchen.de/4255/1/MPRA_paper_4255.pdf
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    References listed on IDEAS

    as
    1. Kato, Kazuhiko & Tomaru, Yoshihiro, 2007. "Mixed oligopoly, privatization, subsidization, and the order of firms' moves: Several types of objectives," Economics Letters, Elsevier, vol. 96(2), pages 287-292, August.
    2. Charles D. Kolstad & Lars Mathiesen, 1987. "Necessary and Sufficient Conditions for Uniqueness of a Cournot Equilibrium," Review of Economic Studies, Oxford University Press, vol. 54(4), pages 681-690.
    3. 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.
    4. repec:ebl:ecbull:v:12:y:2002:i:1:p:1-6 is not listed on IDEAS
    5. White, Mark D., 1996. "Mixed oligopoly, privatization and subsidization," Economics Letters, Elsevier, vol. 53(2), pages 189-195, November.
    6. Matsumura, Toshihiro, 1998. "Partial privatization in mixed duopoly," Journal of Public Economics, Elsevier, vol. 70(3), pages 473-483, December.
    7. Fjell, Kenneth & Heywood, John S., 2004. "Mixed oligopoly, subsidization and the order of firm's moves: the relevance of privatization," Economics Letters, Elsevier, vol. 83(3), pages 411-416, June.
    8. Gareth Myles, 2002. "Mixed oligopoly, subsidization and the order of firms' moves: an irrelevance result for the general case," Economics Bulletin, AccessEcon, vol. 12(1), pages 1-6.
    9. de Fraja, Giovanni & Delbono, Flavio, 1989. "Alternative Strategies of a Public Enterprise in Oligopoly," Oxford Economic Papers, Oxford University Press, vol. 41(2), pages 302-311, April.
    Full references (including those not matched with items on IDEAS)

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    Cited by:

    1. Ya-Chin Wang, 2016. "R&D Policy Involving Consumer-Friendly Strategy: Cooperative and Non-Cooperative R&D," Journal of Industry, Competition and Trade, Springer, vol. 16(2), pages 257-272, June.

    More about this item

    Keywords

    Mixed oligopoly; public firms; subsidy; tax; irrelevance principle; privatization;

    JEL classification:

    • L2 - Industrial Organization - - Firm Objectives, Organization, and Behavior
    • L3 - Industrial Organization - - Nonprofit Organizations and Public Enterprise
    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance

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