Economics at your fingertips  

Mixed duopoly: Differential game approach

Koichi Futagami (), Toshihiro Matsumura () and Kizuku Takao

Journal of Public Economic Theory, 2019, vol. 21, issue 4, 771-793

Abstract: This study formulates a dynamic mixed oligopoly model, in which a state‐owned public firm competes against a private firm over multiple periods. We adopt a differential game formulated by Fershtman and Kamien [Econometrica 55 (1987), pp. 1151–1164] and investigate how the dynamic competition affects the optimal privatization policy. We characterize the open‐loop Nash equilibrium (OLNE) and Markov‐perfect Nash equilibrium (MPNE). We show that in the MPNE, an increase in the degree of privatization has a nonmonotonic effect on the price, increasing it in a wide range of parameter spaces, which is in sharp contrast to the result in the OLNE or static analyses. We also find that the optimal degree of privatization is higher in the MPNE than that in the OLNE and static equilibrium. These results suggest that intertemporal strategic behavior changes the optimal privatization policy.

Date: 2019
References: Add references at CitEc
Citations: Track citations by RSS feed

Downloads: (external link)

Related works:
Working Paper: Mixed Duopoly: Differential Game Approach (2017) Downloads
Working Paper: Mixed Duopoly: Differential Game Approach (2017) Downloads
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:

Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=1097-3923

Access Statistics for this article

Journal of Public Economic Theory is currently edited by Rabah Amir, Gareth Myles and Myrna Wooders

More articles in Journal of Public Economic Theory from Association for Public Economic Theory Contact information at EDIRC.
Bibliographic data for series maintained by Wiley Content Delivery ().

Page updated 2020-07-02
Handle: RePEc:bla:jpbect:v:21:y:2019:i:4:p:771-793