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Strategic quality competition, mixed oligopoly and privatization

Munirul Nabin (), Xuan Nguyen, Pasquale Sgro () and Chi-Chur Chao

International Review of Economics & Finance, 2014, vol. 34, issue C, 142-150

Abstract: The argument behind increasing privatization of public firms in developing and transition economies is that profit-driven private enterprises are more efficient than state-owned enterprises. However, when it comes to quality competition where the higher quality is considered as more environmentally friendly, the profit motive may lead to a worse outcome if it fails to incorporate the cost of negative externalities in the form of environmental damages. We demonstrate that neither partial nor full privatization leads to a better outcome in terms of environmental performance and welfare maximization than a state-owned monopoly, which is consistent with recent evidence from China.

Keywords: Environment; Mixed oligopoly; Privatization; Product quality; State-owned enterprise (search for similar items in EconPapers)
JEL-codes: L15 L33 (search for similar items in EconPapers)
Date: 2014
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DOI: 10.1016/j.iref.2014.08.002

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