Equilibrium Coexistence of Public and Private Firms and the Plausibility of Price Competition

Manipushpak Mitra, Rupayan Pal, Arindam Paul and P. M. Sharada

Journal of Institutional and Theoretical Economics (JITE), 2020, vol. 176, issue 2, 217-242

Abstract: We consider a differentiated product duopoly where a regulated firm competes with a private firm. The instrument of regulation is the level of privatization. First, the regulator determines the level of privatization to maximize social welfare. Thereafter, both firms endogenously choose the mode of competition (thatis, whether to compete in price or quantity). Finally, the two firms compete in the market. Under a very general demand specification, we show that when the products are imperfect substitutes (complements), public (strictly partially private) and private firms coexist. Moreover, in the second stage, the firms competein prices.

Keywords: partially private firm; price (Bertrand) competition; quantity (Cournot)competition (search for similar items in EconPapers)
JEL-codes: D4 D6 H4 L1 L2 (search for similar items in EconPapers)
Date: 2020
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Working Paper: Equilibrium co-existence of public and private firms and the plausibility of price competition (2017)
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DOI: 10.1628/jite-2019-0041

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