Picture of a sphere with binary code

Making Strathclyde research discoverable to the world...

The Strathprints institutional repository is a digital archive of University of Strathclyde research outputs. It exposes Strathclyde's world leading Open Access research to many of the world's leading resource discovery tools, and from there onto the screens of researchers around the world.

Explore Strathclyde Open Access research content

On Public Inefficiencies in a Mixed Duopoly

De Feo, Giuseppe and Capuano, Carlo (2009) On Public Inefficiencies in a Mixed Duopoly. Discussion paper. Department of Economics.

Full text not available in this repository. (Request a copy from the Strathclyde author)

Abstract

The aim of this paper is to investigate the welfare eect of a change in the public firms objective function in oligopoly when the government takes into account the distortionary effect of rising funds by taxation (shadow cost of public funds). We analyze the impact of a shift from welfare- to profit-maximizing behaviour of the public firm on the timing of competition by endogenizing the determination of simultaneous (Nash-Cournot) versus sequential (Stackelberg) games using the game with observable delay proposed by Hamilton and Slutsky (1990). Differently from previous work that assumed the timing of competition, we show that, absent efficiency gains, instructing the public firm to play as a private one never increases welfare. Moreover, even when large effciency gains result from the shift in public firm's objective, an inefficient public firm that maximizes welfare may be preferred.