Supply Function Equilibria and Nonprofit-Maximizing Objectives

Haraguchi, Junichi and Yasui, Yuta (2017): Supply Function Equilibria and Nonprofit-Maximizing Objectives.

Abstract

We examine the supply function equilibrium (SFE), which is often used in the analysis of multi-unit auctions such as wholesale electricity markets, among (partially) public firms. In a general model, we characterize the SFE of such firms and examine the properties of symmetric SFE. We show, analyzing an asymmetric SFE in a duopoly model with linear demand and quadratic cost functions, that, when a partially public firm weighs more on the social welfare, the supply functions of not only the partially public firm but also a profit maximizing firm are flatter at the equilibrium. We also confirm that in a linear-quadratic model, the SFE converges to the (inverse) marginal cost function when the firms' social concerns increase symmetrically in the industry.

• Item Type: MPRA Paper
• Language: English
• Keywords: supply function equilibrium, electricity markets, partial privatization, corporate social responsibility, mixed oligopoly
• Subjects: H - Public Economics > H4 - Publicly Provided Goods > H42 - Publicly Provided Private Goods; L - Industrial Organization > L1 - Market Structure, Firm Strategy, and Market Performance > L13 - Oligopoly and Other Imperfect Markets; L - Industrial Organization > L3 - Nonprofit Organizations and Public Enterprise > L33 - Comparison of Public and Private Enterprises and Nonprofit Institutions ; Privatization ; Contracting Out

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