Published March 31, 2023 | Version v1
Journal article Open

Mixed Duopoly, Privatization and Subsidization: Complementary Goods

Authors/Creators

  • 1. Department of Economics, Institute for Economic Sciences, Kobe, Japan

Description

This paper uses a mixed market model in which a state-owned public firm and a private firm produce complementary goods and reassesses the welfare effects of production subsidies. The paper examines four regimes: mixed and private duopoly, each with and without subsidies. In the regimes without subsidies, a one-shot Cournot-Nash game is considered. In the regimes with subsidies, the following two-stage game is considered: At the first stage the government chooses the subsidy level to maximize social welfare, and at the second stage each firm observes the subsidy and simultaneously chooses its output level. The paper presents the following two main results. First, if production subsidies are used only before privatization, then there is a reduction in social welfare. Second, if production subsidies are used before and after privatization, then social welfare is not changed by privatization. The paper finds that the results are the same as those obtained by White (1996) that examines the welfare effects of production subsidies in a Cournot mixed market with homogeneous goods.

Files

231024 Ohnishi.pdf

Files (310.7 kB)

Name Size
md5:52c1bc48a931bb966aa6efe3766cef76
310.7 kB Preview Download

Additional details

Identifiers

URL
https://dorl.net/dor/20.1001.1.23832126.2023.10.2.4.9

References

  • Anderson, S. P., de Palma, A., & Thisse, J.-F. (1997). Privatization and efficiency in a differentiated industry. European Economic Review 41 (9), 1635-1654.
  • Bárcena-Ruiz, J. C., & Garzón, M. B. (2005). Economic integration and privatisation under diseconomies of scale. European Journal of Political Economy 21 (1), 247-267.
  • Bosi, S., Girmens, G., & Guillard, M. (2005). Optimal privatization design and financial markets. Journal of Public Economic Theory 7 (5), 799-826.
  • Chang, W. W. (2005). Optimal trade and privatization policies in an international duopoly with cost asymmetry. Journal of International Trade and Economic Development 14 (1), 19-42.
  • Chao, C.-C., & Yu, E. S.-H. (2006). Partial privatization, foreign competition, and optimum tariff. Review of International Economics 14 (1), 87-92.
  • Dadpay, A. (2014). Subsidization and privatization: in a multinational mixed oligopoly. Eastern Economic Journal 40 (1), 5-25.
  • Fjell, K., & Pal, D. (1996). A mixed oligopoly in the presence of foreign private firms. Canadian Journal of Economics 29 (3), 737-743.
  • George, K., & La Manna, M. (1996). Mixed duopoly, inefficiency, and public ownership. Review of Industrial Organization 11 (6), 853-860.
  • Gronberg, T. J., & Hwang, H. (1992). On the privatization of excludable public goods. Southern Economic Journal 58 (4), 904-921.
  • Han, L., & Ogawa, H. (2008). Economic integration and strategic privatization in an international mixed oligopoly. FinanzArchiv 64 (3), 352-363.
  • Kato, K., & Tomaru, Y. (2007). Mixed oligopoly, privatization, subsidization and the order of firms' moves: several types of objectives. Economics Letters 96 (2), 287-292.
  • Kim, S.-L., Lee, S.-H., & Matsumura, T. (2019). Corporate social responsibility and privatization policy in a mixed oligopoly. Journal of Economics 128 (1), 67-89.
  • Mujumdar, S., & Pal, D. (1998). Effects of indirect taxation in a mixed oligopoly. Economics Letters 58 (2), 199-204.
  • Myles, G. (2002). Mixed oligopoly, subsidization and the order of firms' moves: an irrelevance result for the general case. Economics Bulletin 12 (1), 1-6.
  • Ohnishi, K. (2012). Price-setting mixed duopoly, privatization and subsidization. Microeconomics and Macroeconomics 1 (1), 20-23.
  • Ohnishi, K. (2021). Mixed duopoly, privatization, subsidization and partial foreign ownership. International Journal of Management, Accounting and Economics 8 (9), 707-714.
  • Pal, D., & White, M. D. (1998). Mixed oligopoly, privatization, and strategic trade policy. Southern Economic Journal 65 (2), 264-281.
  • Poyago-Theotoky, J. (2001). Mixed oligopoly, subsidization and the order of firms' moves: an irrelevance result. Economics Bulletin 12 (3), 1-5.
  • Sasaki, D., & Wen, M. (2003). On optimal privatization. In M. Baldassarri, & L. Lambertini, Antitrust, Regulation and Competition (pp. 193-216). New York: Palgrave Macmillan.
  • Wang, L. F.-S., Wang, Y., & Zhao, L. (2009). Privatization and efficiency gain in an international mixed oligopoly with asymmetric costs. Japanese Economic Review 60 (4), 539-559.
  • White, M. D. (1996). Mixed oligopoly, privatization and subsidization. Economics Letters 53 (2), 189-195.