Inefficient but Robust Public Leadership

Toshihiro Matsumura and Akira Ogawa ()

Journal of Industry, Competition and Trade, 2017, vol. 17, issue 4, No 2, 387-398

Abstract: Abstract We investigate endogenous timing in a mixed duopoly in a differentiated product market. We find that private leadership is better than public leadership from a social welfare perspective if the private firm is domestic, regardless of the degree of product differentiation. Nevertheless, the public leadership equilibrium is risk-dominant, and it is thus robust if the degree of product differentiation is high. We also find that regardless of the degree of product differentiation, the public leadership equilibrium is risk-dominant if the private firm is foreign. These results may explain the recent revival of public financial institutions in Japan.

Keywords: Public financial institutions; Differentiated products; Risk dominance; Stackelberg (search for similar items in EconPapers)
JEL-codes: H42 L13 (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (14)

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Working Paper: Inefficient but robust public leadership (2014)
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DOI: 10.1007/s10842-017-0248-1

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