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Quality And Welfare In Mixed Duopoly: Effects Of Capacity Reduction

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  • MASUYUKI NISHIJIMA

Abstract

Under rationing of a public service due to its lower price and higher quality, the “privatization” could be regarded as a reduction in the capacity of the public service. We develop a model of mixed duopoly in which the service is vertically differentiated, a public firm is in a Stackelberg leader position, rationing happens, and the market is not covered. In one of two possible cases, it is shown that any reduction in the capacity of a public service will lower total surplus unless the price of the public service is too low and its quality is too high.

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  • Masuyuki Nishijima, 2009. "Quality And Welfare In Mixed Duopoly: Effects Of Capacity Reduction," The Japanese Economic Review, Japanese Economic Association, vol. 60(1), pages 97-109, March.
    • Handle: RePEc:bla:jecrev:v:60:y:2009:i:1:p:97-109
    DOI: 10.1111/j.1468-5876.2008.00463.x
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    References listed on IDEAS

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