Optimal privatisation, and optimum-welfare and maximum-revenue tariffs

Tien-Der Han and Ruochen Li

Economic and Political Studies, 2024, vol. 12, issue 2, 220-234

Abstract: We examine the effect of privatisation on the priority of the maximum-revenue tariff and the optimum-welfare tariff in an international mixed oligopoly with foreign competition and optimal privatisation. We demonstrate that when the marginal cost of the domestic privatised firm is high enough, the optimum-welfare tariff will exceed the maximum-revenue tariff. Moreover, due to the higher tariff rate that leads to the high degree of privatisation, the optimum-welfare tariff generates greater optimal privatisation than the maximum-revenue tariff does. Lastly, when the gap between the number of domestic private firms and that of their foreign counterparts becomes larger, the optimum-welfare tariff will exceed the maximum-revenue tariff.

Date: 2024
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DOI: 10.1080/20954816.2023.2276968

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