MARKET-DEMAND BOOSTING AND PRIVATIZATION IN A MIXED DUOPOLY

Authors


Lihua Han, School of Political Science and Public Administration, Shandong University, 5 Hongjialou, Jinan 250100, P.R. China; Email: lihuah2003@hotmail.com. The authors are grateful to two anonymous referees for their constructive suggestions. The second author is supported by grants from the Japan Society for the Promotion of Science (No. 21243023).

ABSTRACT

This study incorporates demand-boosting strategies into a mixed duopoly model in order to consider the endogenous determination of market demand. The results indicate equilibrium characteristics that differ from those found under an exogenous demand setting. As consumers become more sensitive to the demand-boosting strategies of firms, the government must choose a lower level of privatization. This suggests that the responsiveness of consumer demand to the demand-boosting strategies of firms constitutes a limiting factor for privatization.

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