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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.

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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.

Item type: Monograph (Discussion paper)
ID code: 15361
Keywords: Mixed oligopoly, Nash equilibria, Endogenous Timing, Distortionary taxes, Economic Theory
Subjects: Social Sciences > Economic Theory
Department: Strathclyde Business School > Economics
Related URLs:
    Depositing user: Mrs Kirsty Fontanella
    Date Deposited: 08 Jan 2010 15:05
    Last modified: 12 Mar 2012 11:01
    URI: http://strathprints.strath.ac.uk/id/eprint/15361

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