Optimal Privatization and Subsidization Policies in a Mixed Duopoly: Relevance of a Cost Gap

Yoshihiro Tomaru () and Leonard F. S. Wang

Journal of Institutional and Theoretical Economics (JITE), 2018, vol. 174, issue 4, 689-706

Abstract: This study considers subsidization and privatization policies in a mixed duopoly with one public firm and one private firm. The special feature of this study is that privatization can reduce the cost gap between the firms. We show that the optimal subsidy yields the efficient production allocation if privatization is not implemented. However, once the public firm is privatized, it overproduces under the optimal subsidy. Moreover, partial privatization is optimal unless privatization significantly reduces the cost gap.

Keywords: partial privatization; subsidization; cost gap; mixed duopoly (search for similar items in EconPapers)
JEL-codes: H42 L13 L32 (search for similar items in EconPapers)
Date: 2018
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Citations: View citations in EconPapers (12)

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DOI: 10.1628/jite-2018-0005

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