Public vs. Private Investments In Network Industries

Jean-Marc Zogheib and Marc Bourreau

No 2021-4, EconomiX Working Papers from University of Paris Nanterre, EconomiX

Abstract: We study the competition between a private firm and public firms on prices andinvestment in new infrastructures. While the private firm maximizes its profits,public firms maximize the sum of their profits and consumer surplus, subject to abudget constraint. We consider two scenarios of public intervention, with a nationalpublic firm and with local public firms. In a monopoly benchmark, we find that thenational public firm has the highest coverage and charges a uniform price allowingcross-subsidies between high-cost and low-cost areas. Moreover, the private firmcovers as much as local public firms. In a mixed duopoly, a stronger competitivepressure drives firms' prices up while it drives down (up) the national public (private)firm's coverage.

Keywords: public firms; investment; network industries; mixed duopoly. (search for similar items in EconPapers)
JEL-codes: D43 H44 L20 L33 (search for similar items in EconPapers)
Pages: 52 pages
Date: 2021
New Economics Papers: this item is included in nep-bec, nep-com, nep-ind, nep-mic and nep-reg
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Working Paper: Public vs. Private Investments In Network Industries (2021)
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Persistent link: https://EconPapers.repec.org/RePEc:drm:wpaper:2021-4

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