Should public sectors be complements of private sectors?

Ikuo Ishibashi and Noriaki Matsushima
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Ikuo Ishibashi: Department of Economics, Aoyama Gakuin University

No 2008-58, Discussion Papers from Kobe University, Graduate School of Business Administration

Abstract: This paper discusses competition between high-quality private service providers that maximize their own profits and a low-quality public service provider that maximizes social surplus. There are two heterogeneous consumer groups: those who demand only high-quality services and those who care little whether services are highor low-quality. The setting reflects the fact that some consumers feel dissatisfaction with public service providers. We show that, under certain conditions, social welfare is smaller when there is a public service provider than when there is not. The result holds even though the efficiency of the public service is equal to that of the private services.

Keywords: public versus private sectors; quality; differentiation; mixed marketsClassification-JEL: H42; L13; I12 (search for similar items in EconPapers)
Pages: 25 pages
Date: 2008-12
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Citations: View citations in EconPapers (2)

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https://www.b.kobe-u.ac.jp/papers_files/2008_58.pdf First version, 2008 (application/pdf)

Related works:
Journal Article: Should Public Sectors Be Complements of Private Sectors? (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:kbb:dpaper:2008-58

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