Roy Chowdhury, Prabal (2007): Mixed oligopoly with consumer-friendly public firms.
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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.
|Item Type:||MPRA Paper|
|Institution:||Indian Statistical Institute, Delhi Center|
|Original Title:||Mixed oligopoly with consumer-friendly public firms|
|Keywords:||Mixed oligopoly; public firms; subsidy; tax; irrelevance principle; privatization|
|Subjects:||L - Industrial Organization > L2 - Firm Objectives, Organization, and Behavior
L - Industrial Organization > L3 - Nonprofit Organizations and Public Enterprise
L - Industrial Organization > L1 - Market Structure, Firm Strategy, and Market Performance
|Depositing User:||Prabal Roy Chowdhury|
|Date Deposited:||26. Jul 2007|
|Last Modified:||19. Feb 2013 05:56|
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