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A low willingness to pay in a duopoly a la Hotelling: The role of the public firm

Stefano Quarta

No EERI RP 2019/12, EERI Research Paper Series from Economics and Econometrics Research Institute (EERI), Brussels

Abstract: The purpose of this paper is to analyze the role of the public firm in a spatial duopoly model a la Hotelling in the case of a low willingness to pay. We find that the presence of a public firm has the well known regulatory function in a market with a relative high willingness to pay; it is irrelevant in a market with a medium level of the willingness to pay; the relevance is for a low willingness to pay, where it ensures the full market coverage (as a result of the standard welfare maximization); finally, if the willingness to pay is very low, the public firm ensures a higher, but not full, market coverage with respect to the pure private case. Finally, we find that, for a low willingness to pay, the presence of the public firm is not sufficient to guarantee the optimal market configuration, so that the efficient level of welfare.

Keywords: Mixed duopoly; full market coverage; low willingness to pay; efficient welfare. (search for similar items in EconPapers)
JEL-codes: L13 C72 D71 (search for similar items in EconPapers)
Date: 2019-11-12
New Economics Papers: this item is included in nep-bec, nep-ind and nep-mic
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