Endogenous Public and Private Leadership with Diverging Social and Private Marginal Costs

Junichi Haraguchi and Toshihiro Matsumura

MPRA Paper from University Library of Munich, Germany

Abstract: We investigate endogenous timing in a mixed duopoly with price competition and with social marginal cost differing from private marginal costs. We find that any equilibrium timing patterns--Bertrand, Stackelberg with private leadership, Stackelberg with public leadership, and multiple Stackelberg equilibria-- emerge. When the foreign ownership share in a private firm is less than 50%, public leadership more likely emerges than private leadership. Conversely, private leadership can emerge in a unique equilibrium when the foreign ownership share in a private firm is large. These results may explain recent policy changes in public financial institutions in Japan. We also find a nonmonotone relationship between the welfare advantage of public and private leadership and the difference between social and private marginal costs for a private firm. A nonmonotone relationship does not emerge in profit ranking.

Keywords: public financial institutions; differentiated products; Bertrand; Stackelberg; payoff dominance (search for similar items in EconPapers)
JEL-codes: H42 L13 (search for similar items in EconPapers)
Date: 2019-04-20
New Economics Papers: this item is included in nep-bec, nep-com, nep-gth, nep-ind, nep-mic and nep-pbe
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Journal Article: Endogenous public and private leadership with diverging social and private marginal costs (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:93450

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