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Mixed duopoly in price competition under the optimal privatization rate

Kojun Hamada

Economics Bulletin, 2021, vol. 41, issue 3, 1282-1291

Abstract: This study examines social welfare in a mixed duopoly in differentiated products in which a partially privatized firm and a private firm simultaneously or sequentially compete in price after the government sets the optimal degree of privatization for the partially privatized firm. Comparing social welfare when the timing of decision making is different, we present the following results. When the degree of substitutability of goods is low, social welfare in the Stackelberg equilibrium is the largest when a partially privatized firm is the leader. By contrast, when the degree is high, the social welfare in the Bertrand equilibrium is the largest. Unlike the results presented in quantity competition, the Stackelberg equilibrium when a partially privatized firm is the follower never achieves the largest social welfare.

Keywords: mixed duopoly; partial privatization; price competition; Stackelberg equilibrium (search for similar items in EconPapers)
JEL-codes: D4 L2 (search for similar items in EconPapers)
Date: 2021-09-06
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