Privatization and Quality Differentiation with Excess Burden of Taxation

Kangsik Choi and Xingyan Lu

Hitotsubashi Journal of Economics, 2025, vol. 66, issue 2, 93-112

Abstract: Incorporating the excess burden of taxation into a mixed duopoly to evaluate privatization, we analyze Bertrand competition between the public and private firms producing goods of different qualities. We show that (i) when the only private (resp. public) firm offers high quality, privatization (resp. mixed duopoly) is desirable if the excess burden of taxation is sufficiently large, and vice versa. This implies that the governmentʼs role in implementing privatization goes in the opposite direction; (ii) if the excess burden of taxation is intermediate, privatization is preferable regardless of the public firmʼs quality.

Keywords: excess burden of taxation; change of quality gap; privatization; mixed duopoly; Bertrand (search for similar items in EconPapers)
JEL-codes: D43 L13 M21 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:hit:hitjec:v:66:y:2025:i:2:p:93-112

DOI: 10.15057/hje.2025005

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