Spatial price discrimination in a mixed duopoly input market

John Heywood, Zerong Wang and Guangliang Ye

Regional Science and Urban Economics, 2023, vol. 102, issue C

Abstract: We uniquely examine an upstream mixed duopoly engaging in spatial price discrimination across a continuum of downstream markets. The monopoly firms in those markets face elastic final demand creating double marginalization. The upstream public firm faces a cost disadvantage relative to its private rival that declines as it is partially privatized. We show that the fully public firm improves social welfare relative to a private duopoly when it is not overly inefficient and when differentiation is sufficiently large. We also show that whenever this is the case, there exists an optimal degree of partial privatization that better aligns the trade-off between production costs and pricing distortions.

Keywords: Mixed duopoly; Input market; Spatial price discrimination (search for similar items in EconPapers)
JEL-codes: L13 L32 L52 (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:eee:regeco:v:102:y:2023:i:c:s0166046223000698

DOI: 10.1016/j.regsciurbeco.2023.103934

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