Subsidization and Privatization: In a Multinational Mixed Oligopoly

Ali Dadpay

Eastern Economic Journal, 2013, vol. 40, issue 1, 5-25

Abstract: This paper studies a single multinational market where private and public firms from different nationalities compete. The model allows the domestic government to subsidize its firms. In contrast to previous studies in this model, the subsidy varies with the market structure. Privatizing either the domestic public firm or the foreign public firm or both of them unambiguously increases the optimal subsidy rate and domestic social welfare. Nonetheless, both countries would benefit from simultaneous privatization.

Date: 2013
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