MIXED OLIGOPOLY, SEQUENTIAL ENTRY, AND SPATIAL PRICE DISCRIMINATION

John Heywood and Guangliang Ye

Economic Inquiry, 2009, vol. 47, issue 3, 589-597

Abstract: This paper is the first to examine the welfare consequences of a public firm in a traditional model of spatial price discrimination. It demonstrates that when a private firm acts as a Stackelberg location leader, the presence of a public firm always improves welfare. Moreover, when three firms locate sequentially, the presence of a public firm improves social welfare unless it locates last. Thus, despite examining a variety of location timings, including simultaneous location, privatization never improves welfare and usually harms welfare. This conclusion differs from several currently in the literature in which privatization often improves welfare. (JEL L13, L32, L33, L52)

Date: 2009
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