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Strategic quality competition, mixed oligopoly and privatization

Author

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  • Nabin, Munirul H.
  • Nguyen, Xuan
  • Sgro, Pasquale M.
  • Chao, Chi-Chur

Abstract

The argument behind increasing privatization of public firms in developing and transition economies is that profit-driven private enterprises are more efficient than state-owned enterprises. However, when it comes to quality competition where the higher quality is considered as more environmentally friendly, the profit motive may lead to a worse outcome if it fails to incorporate the cost of negative externalities in the form of environmental damages. We demonstrate that neither partial nor full privatization leads to a better outcome in terms of environmental performance and welfare maximization than a state-owned monopoly, which is consistent with recent evidence from China.

Suggested Citation

  • Nabin, Munirul H. & Nguyen, Xuan & Sgro, Pasquale M. & Chao, Chi-Chur, 2014. "Strategic quality competition, mixed oligopoly and privatization," International Review of Economics & Finance, Elsevier, vol. 34(C), pages 142-150.
    • Handle: RePEc:eee:reveco:v:34:y:2014:i:c:p:142-150
    DOI: 10.1016/j.iref.2014.08.002
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Choi, Yoonho & Kwan Choi, E., 2018. "Quality competition in north-south trade," International Journal of Production Economics, Elsevier, vol. 201(C), pages 216-224.
    2. Wang, Wei & Liu, Xiujuan & Ding, Lili & Li, Chen & Zhang, Wensi, 2018. "The optimal port privatization levels under inter-port competition: Considering both horizontal and vertical differentiation," Economics Discussion Papers 2018-84, Kiel Institute for the World Economy (IfW Kiel).
    3. Chih-Wei Chang & Dachrahn Wu & Yan-Shu Lin, 2018. "Price control and privatization in a mixed duopoly with a public social enterprise," Journal of Economics, Springer, vol. 124(1), pages 57-73, May.
    4. Jumpei Hamamura & Vinay Ramani, 2023. "Social performance versus relative performance evaluation, asymmetric costs, and quantity competition under managerial delegation," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 44(3), pages 1706-1719, April.
    5. Riyad Neman Darwazeh & Mohammad Dabaghia, 2018. "Privatization Effect on Shareholder Value in the Jordanian State Owned Enterprises," International Journal of Economics and Financial Issues, Econjournals, vol. 8(2), pages 70-78.
    6. Nabin, Munirul H. & Sgro, Pasquale M. & Nguyen, Xuan & Chao, Chi Chur, 2016. "State-owned enterprises, competition and product quality," International Review of Economics & Finance, Elsevier, vol. 43(C), pages 200-209.
    7. Alessandra Chirco & Marcella Scrimitore, 2017. "Privatization in an International Mixed Oligopoly: the Role of Product Differentiation under Price Competition," EERI Research Paper Series EERI RP 2017/06, Economics and Econometrics Research Institute (EERI), Brussels.
    8. Sato, Susumu & Matsumura, Toshihiro, 2019. "Shadow cost of public funds and privatization policies," The North American Journal of Economics and Finance, Elsevier, vol. 50(C).
    9. Xu, Lili & Matsumura, Toshihiro, 2022. "Welfare-reducing price competition under relative performance delegation with convex costs," Economic Modelling, Elsevier, vol. 112(C).
    10. Levin, Mark (Левин, Марк) & Busygin, V. (Бусыгин, В.) & Popova, E.V. (Попова, Е.), 2016. "Development and Analysis of Strategies for Selecting Models of Mixed Market Participants [Разработка И Анализ Моделей Выбора Стратегий Участниками Смешанных Рынков]," Working Papers 3054, Russian Presidential Academy of National Economy and Public Administration.
    11. Alessandra Chirco & Marcella Scrimitore, 2023. "Privatization in an International Mixed Oligopoly: the Role of Product Differentiation under Price Competition," Discussion Papers 2023/301, Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy.

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    More about this item

    Keywords

    Environment; Mixed oligopoly; Privatization; Product quality; State-owned enterprise;
    All these keywords.

    JEL classification:

    • L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality
    • L33 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Comparison of Public and Private Enterprise and Nonprofit Institutions; Privatization; Contracting Out

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