Mixed duopoly, location choice, and shadow cost of public funds
Toshihiro Matsumura () and
Yoshihiro Tomaru ()
Southern Economic Journal, 2015, vol. 82, issue 2, 416-429
We examine the relationship between equilibrium and efficient levels of product differentiation in a mixed duopoly, where a welfare-maximizing public enterprise competes with a profit-maximizing private firm. We introduce shadow costs of public funding (i.e., the excess burden of taxation). The profits of public firms obtained by the government reduce these costs. We find that in a mixed duopoly, the level of product differentiation is too low for social welfare. This result is in sharp contrast to the private oligopoly, where the level of product differentiation is too high. Finally, we show that when the shadow cost is high, privatizing the public enterprise improves welfare.
JEL-codes: L13 L33 H20 (search for similar items in EconPapers)
References: Add references at CitEc
Citations View citations in EconPapers (10) Track citations by RSS feed
Downloads: (external link)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:sej:ancoec:v:82:2:y:2015:p:416-429
Access Statistics for this article
Southern Economic Journal is currently edited by Laura Razzolini
More articles in Southern Economic Journal from Southern Economic Association Contact information at EDIRC.
Bibliographic data for series maintained by Laura Razzolini ().