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Profitability in Cournot and Bertrand Mixed Markets under Endogenous Objectives

Marcella Scrimitore ()

MPRA Paper from University Library of Munich, Germany

Abstract: We examine both quantity and price competition between a number of profit-maximizing firms and a state-controlled enterprise (SCE). The objective function of the latter is strategically defined by a welfare-maximizing government which weighs the SCE’s profits relative to consumer surplus and private profits. Different motives drive the government‘s optimal behavior in the two competitive settings and lead all firms in oligopoly to gain higher profits in Cournot than in Bertrand. The profit ordering is reverted, and social welfare is enhanced, with respect to the purely-mixed market examined by Ghosh and Mitra (2010). In duopoly, aggregate profits are equivalent in Cournot and Bertrand.

Keywords: Cournot; Bertrand; endogenous objectives; partial privatization (search for similar items in EconPapers)
JEL-codes: D43 L13 L32 (search for similar items in EconPapers)
Date: 2011-10-24
New Economics Papers: this item is included in nep-bec, nep-com and nep-ind
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