A new irrelevance result in an endogenous timing with a consumer-friendly public firm

Garcia, Arturo and Leal, Mariel and Lee, Sang-Ho (2018): A new irrelevance result in an endogenous timing with a consumer-friendly public firm.

Abstract

This study considers a mixed duopoly with a consumer-friendly public firm and analyzes an endogenous timing game in the presence of output subsidy and emission tax. We provide a new irrelevance result concerning the choice of government policy in which regardless of the policy mix, the equilibrium of endogenous market structure is determined by the public firm’s concern on consumer surplus. We also show that the optimal policy mix can attain the first-best allocation for social welfare only when both firms have symmetric payoffs, which results in simultaneous-move outcome.

• Item Type: MPRA Paper
• Language: English
• Keywords: Keywords: irrelevance result; endogenous timing game; consumer-friendly public firm; emission tax; output subsidy
• Subjects: 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 > L32 - Public Enterprises ; Public-Private Enterprises

References

Brennan, T. J. 1989, ‘Regulating by capping prices’, Journal of Regulatory Economics, vol. 1, no. 2, pp. 133-147.

Cato, S. and Matsumura, T. 2013, ‘Long-run effects of tax policies in a mixed market’, FinanzArchiv, vol. 69, no. 2, pp. 215-240.

Crifo, P. and Forget, V.D. 2015, ‘The economics of corporate social responsibility: A firm-level perspective survey’, Journal of Economic Surveys, vol. 29, no. 1, pp. 112–130.

Fjell, K. and Heywood, J. 2004, ‘Mixed oligopoly, subsidization and the order of firm’s moves: The relevance of privatization’, Economics Letters, vol. 83, no. 3, pp. 411-416.

Hamilton, J.H. and Slutsky, S.M. 1990, ‘Endogenous timing in duopoly games: Stackelberg or cournot equilibria’, Games and Economic Behavior, vol. 2, no. 1, pp. 29 - 46.

Hashimzade, N., Khodavaisi, H. and Myles, G. 2007, ‘An irrelevance result with differentiated goods’, Economics Bulletin, vol. 8, no. 2.

Kato, K. and Tomaru, Y. 2007, ‘Mixed oligopoly, privatization, subsidization, and the order of firms’ moves: Several types of objectives’, Economics Letters, vol. 96, no. 2, pp. 287-292.

Kim, J.-C. and Chang, K.-B. 1993, ‘An optimal tax/subsidy for output and pollution control under asymmetric information in oligopoly markets’, Journal of Regulatory Economics, vol. 5, no. 2, pp. 183-197.

Kim, J.-C. and Lee, S.-H. 1995, ‘An optimal regulation in an intertemporal oligopoly market: The Generalized Incremental Surplus Subsidy (GISS) scheme’, Information Economics and Policy, vol. 7, no. 3, pp. 225-249.

Kitzmueller, M. and Shimshack, J. 2012, ‘Economic Perspectives on Corporate Social Responsibility’, Journal of Economic Literature, vol. 50, no. 1, pp. 51-84.

KPMG 2015, ‘International Survey of Corporate Responsibility Reporting 2015’

Lee, S.-H. 1997, ‘A Note on Regulating Oligopolistic Industries: A Hierarchical Model’, Journal of Regulatory Economics, vol. 12, no. 1, pp. 91-97.

Lee, S.H., 1998, ‘R&D Spillovers, Technology Cartel, and Monopoly Regulation’, International Economic Journal, vol. 12, no. 3, pp. 77-88.

Lee, S.-H. and Tomaru, Y. 2017, ‘Output and R&D subsidies in a mixed oligopoly’, Operations Research Letters, vol. 45, no. 3, pp. 238-241.

Lee, S.-H. and Xu, L. 2017, ‘Endogenous timing in private and mixed duopolies with emission taxes’, Journal of Economics/ Zeitschrift fur Nationalokonomie, article in press, pp. 1-27.

Lyon, T.P. and Maxwell, J.W. 2004, Corporate Environmentalism and Public Policy. Cambridge University Press.

Matsumura, T., Matsushima, N. and Cato, S. 2013, ‘Competitiveness and R&D competition revisited’, Economic Modelling, vol. 31, no. 1, pp. 541-547.

Matsumura, T. and Ogawa, A. 2017, ‘Endogenous Timing in Mixed Duopolies With Externality’, Australian Economic Papers, vol. 56, no. 4, pp. 304-327.

Matsumura, T. and Okamura, M. 2015, ‘Competition and privatization policies revisited: the payoff interdependence approach’, Journal of Economics/ Zeitschrift fur Nationalokonomie, vol. 116, no. 2, pp. 137-150.

Matsumura, T. and Okumura, Y. 2013, ‘Privatization neutrality theorem revisited’, Economics Letters, vol. 118, no. 2, pp. 324-326.

Matsumura, T. and Tomaru, Y. 2013, ‘Mixed duopoly, privatization, and subsidization with excess burden of taxation’, Canadian Journal of Economics, vol. 46, no. 2, pp. 526-554.

Matsumura, T. and Tomaru, Y. 2015, ‘Mixed duopoly, location choice, and shadow cost of public funds’, Southern Economic Journal, vol. 82, no. 2, pp. 416-429.

Pal, D. 1998, ‘Endogenous timing in a mixed oligopoly’, Economics Letters, vol. 61, no. 2, pp. 181 - 185.

Pal, D. and White, M.D. 1998, ‘Mixed oligopoly, privatization, and strategic trade policy’, Southern Economic Journal, vol. 65, no. 2, pp. 264-281.

Poyago-Theotoky, J. 2001, ‘Mixed oligopoly, subsidization and the order of firms’ moves: an irrelevance result’, Economics Bulletin, vol. 12, no. 3, pp. 1-5.

PricewaterhouseCoopers 2010, ‘CSR Trends’

Tomaru, Y. 2006, ‘Mixed oligopoly, partial privatization and subsidization’, Economics Bulletin, vol. 12, no. 1.

Tomaru, Y. and Kiyono, K. 2010, ‘Endogenous timing in mixed duopoly with increasing marginal costs’, Journal of Institutional and Theoretical Economics, vol. 166, no. 4, pp. 591-613.

Tomaru, Y. and Saito, M. 2010, ‘Mixed duopoly, privatization and subsidization in an endogenous timing framework’, Manchester School, vol. 78, no. 1, pp. 41-59.

White, M.D. 1996, ‘Mixed oligopoly, privatization and subsidization’, Economics Letters, vol. 53, no. 2, pp. 189-195.

Xu, L., Cho, S. and Lee, S.-H. 2016, ‘Emission tax and optimal privatization in Cournot-Bertrand competition’, Economic Modelling, vol. 55, no. 2, pp. 73-82.

Zikos, V. 2007, ‘A reappraisal of the irrelevance result in mixed duopoly: A note on R&D competition’, Economics Bulletin, vol. 12, no. 8.