De Feo, G. and Capuano, C. (2006) Mixed duopoly, privatization and the shadow costs of public funds: exogenous and endogenous timing. In: 18th Conference of the SIEP - Italian Public Economics Society, 2005-09-01.
Download (347kB) | Preview
The purpose of this article is to investigate how the introduction of the shadow cost of public funds in the utilitarian measure of the economywide welfare affects the behavior of a welfare maximizer public firm in a mixed duopoly. We prove that when firms play simultaneously, the mixed-Nash equilibrium can dominate any Cournot equilibria implemented after a privatization, with or without efficiency gains. This can be true both in terms of welfare and of public firm's profit. When we consider endogenous timing, we show that either mixed- Nash, private leadership or both Stackelberg equilibria can result as subgameperfect Nash equilibria (SPNE). As a consequence, the sustainability of sequential equilibria enlarges the subspace of parameters such that the market performance with an inefficient public firm is better than the one implemented after a full-efficient privatization. Absent efficiency gains, privatization always lowers welfare.
|Item type:||Conference or Workshop Item (Paper)|
|Keywords:||mixed oligopoly, privatization, endogenous timing, distortionary taxes, Commerce|
|Subjects:||Social Sciences > Commerce|
|Department:||Strathclyde Business School > Economics|
|Depositing user:||Strathprints Administrator|
|Date Deposited:||18 Dec 2008 13:37|
|Last modified:||05 Jan 2017 18:02|