Infrastructure privatization analysis: A public-private duopoly game

Shuai Li, Jiannan Cai and Hubo Cai

Transport Policy, 2019, vol. 83, issue C, 80-87

Abstract: Infrastructure privatization leads to the coexistence of public and private sectors in one system. This paper contributes to the body of knowledge by elaborating a public-private duopoly game to address three critical questions arising from the privatization. First, how will the privatization shape the quality and pricing decisions by both the public and private sectors? Second, to what extent should the infrastructure or service be privatized and how much should the royalty payment be? Third, how will the efficiency of private sector affect the privatization arrangement? The results suggest that with increasing capacity allocated to the private sector, the private sector charges a higher price and maintains a higher level of quality, while the public sector chooses a higher price but a lower level of quality. The optimal capacity released to the private sector is a function of its efficiency, and the royalty payment increases sharply as the private sector gains more capacity. The analyses reveal the coupled effects of capacity allocation and private efficiency on the quality and pricing decisions, as well as the royalty payments and private profits. A set of capacity-efficiency frontiers are found, beyond which the public-private duopoly performs better than the non-privatization.

Keywords: Decision analysis; Infrastructure privatization; Public-private duopoly; Royalty payment; Capacity allocation; Pricing and quality decisions (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0967070X18308242
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:trapol:v:83:y:2019:i:c:p:80-87

Ordering information: This journal article can be ordered from
http://www.elsevier.com/wps/find/supportfaq.cws_home/regional
https://shop.elsevie ... _01_ooc_1&version=01

DOI: 10.1016/j.tranpol.2019.09.005

Access Statistics for this article

Transport Policy is currently edited by Y. Hayashi

More articles in Transport Policy from Elsevier
Bibliographic data for series maintained by Catherine Liu ().