Munich Personal RePEc Archive

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.

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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.

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