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Optimal policy choice and asymmetric information in a mixed market

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  • Xianhai Huang
  • Qunyan Sun
  • Jie Li

Abstract

In a public-firm monopoly market, we investigate a welfare-maximizing government’s attitude towards the entry of a private firm with private information in cost and the government’s choices over two policy options: a menu of policies and a uniform policy. Two different cases are considered: the case of a domestic private firm and the case of a foreign private firm. In both cases, allowing the entry of the private firm is socially optimal. However, in the first case, policy menu is preferred to uniform policy; in the second case, separation equilibrium does not exist and uniform policy is adopted.

Suggested Citation

  • Xianhai Huang & Qunyan Sun & Jie Li, 2012. "Optimal policy choice and asymmetric information in a mixed market," Asia-Pacific Journal of Accounting & Economics, Taylor & Francis Journals, vol. 19(2), pages 238-251.
    • Handle: RePEc:taf:raaexx:v:19:y:2012:i:2:p:238-251
    DOI: 10.1080/16081625.2012.667384
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    References listed on IDEAS

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    1. Brainard, S. Lael & Martimort, David, 1997. "Strategic trade policy with incompletely informed policymakers," Journal of International Economics, Elsevier, vol. 42(1-2), pages 33-65, February.
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