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Partial privatization in an exhaustible resource industry

Alla Fridman ()
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Alla Fridman: National Research University Higher School of Economics

Authors registered in the RePEc Author Service: Alla Friedman

Journal of Economics, 2018, vol. 124, issue 2, 159-173

Abstract: Abstract The paper proposes a two-stage mixed duopoly model of exhaustible resource market where at the first stage the government decides on the degree of privatization of public firm and at the second stage the public and private firms decide simultaneously on the two-period extraction paths. It is demonstrated that if the two firms have symmetric technologies with increasing marginal extraction costs and the same resource stocks, then neither full nationalization of any of the two firms nor full privatization will be socially desirable. It is shown that the presence of a semi-public firm improves intertemporal allocation of the fixed resource stock. Thus, partial privatization is optimal even under exogenously fixed total outputs of each firm. For asymmetric cost case, when the public firm is less efficient than the private firm, we derive the conditions under which full nationalization or full privatization is optimal.

Keywords: Mixed duopoly; Exhaustible resources; Privatization (search for similar items in EconPapers)
JEL-codes: L13 L33 Q31 (search for similar items in EconPapers)
Date: 2018
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