MIXED DUOPOLY, PRIVATIZATION AND SUBSIDIZATION IN AN ENDOGENOUS TIMING FRAMEWORK

Authors

  • YOSHIHIRO TOMARU,

    1. Faculty of Economics, Toyo University
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  • MASAYUKI SAITO

    1. Graduate School of Economics, Waseda University
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    • We would like to thank Kazuharu Kiyono, Toshihiro Matsumura and Dan Sasaki for their helpful suggestions and comments. We are also indebted to Susumu Cato, Yasuhiko Nakamura, Akira Ogawa, two anonymous referees and Pierre Picard (the editor). Needless to say, we are responsible for any remaining errors. We gratefully acknowledge the financial support of Waseda 21st COE-GLOPE.


  • Manuscript received 15.12.07; final version received 28.10.08.

Abstract

This is the first paper to consider the endogenous timing in mixed duopoly with subsidization. Pal (Economics Letters, Vol. 61 (1998), pp. 181–185) shows that private leadership is always an equilibrium outcome in a mixed duopoly without any subsidy. By including the production subsidy, we observe that private leadership may disappear from equilibrium and that Cournot and public leadership become the likely equilibrium outcomes. Furthermore, we find that when firms have identical technologies the first-best allocation can be attained by the same subsidy before and after privatization even though firms' production timings are endogenized. Finally, we examine privatization with lobbying activities and show that such privatization leads to the deterioration of social welfare.

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