Optimal policy choice and asymmetric information in a mixed market

Xianhai Huang, Qunyan Sun and Jie Li

Asia-Pacific Journal of Accounting & Economics, 2012, vol. 19, issue 2, 238-251

Abstract: In a public-firm monopoly market, we investigate a welfare-maximizing government’s attitude towards the entry of a private firm with private information in cost and the government’s choices over two policy options: a menu of policies and a uniform policy. Two different cases are considered: the case of a domestic private firm and the case of a foreign private firm. In both cases, allowing the entry of the private firm is socially optimal. However, in the first case, policy menu is preferred to uniform policy; in the second case, separation equilibrium does not exist and uniform policy is adopted.

Date: 2012
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DOI: 10.1080/16081625.2012.667384

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Asia-Pacific Journal of Accounting & Economics is currently edited by Yin-Wong Cheung, Hong Hwang, Jeong-Bon Kim, Shu-Hsing Li and Suresh Radhakrishnan

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