PARTIAL PRIVATIZATION IN A MIXED DUOPOLY WITH AN R&D RIVALRY
Version of Record online: 2 APR 2009
© 2009 The Authors. Journal compilation © 2009 Blackwell Publishing Ltd and the Board of Trustees of the Bulletin of Economic Research.
Bulletin of Economic Research
Volume 61, Issue 2, pages 165–178, April 2009
How to Cite
Heywood, J. S. and Ye, G. (2009), PARTIAL PRIVATIZATION IN A MIXED DUOPOLY WITH AN R&D RIVALRY. Bulletin of Economic Research, 61: 165–178. doi: 10.1111/j.1467-8586.2008.00301.x
- Issue online: 2 APR 2009
- Version of Record online: 2 APR 2009
- mixed duopoly;
- public enterprise;
- research and development and partial privatization
This paper is the first to examine the incentive for partial privatization in a mixed duopoly with R&D rivalry. We show that because mixed duopolies engage in more R&D, the optimal extent of privatization is unambiguously reduced. Yet, this reduction is often very modest. Adopting the extent of privatization that would be optimal if one ignored the R&D rivalry routinely results in greater welfare than retaining a fully public firm and ignoring partial privatization. Only when R&D has an extremely low cost would it be preferable to ignore partial privatization.