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Optimal privatisation, and optimum-welfare and maximum-revenue tariffs

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  • Tien-Der Han
  • Ruochen Li

Abstract

We examine the effect of privatisation on the priority of the maximum-revenue tariff and the optimum-welfare tariff in an international mixed oligopoly with foreign competition and optimal privatisation. We demonstrate that when the marginal cost of the domestic privatised firm is high enough, the optimum-welfare tariff will exceed the maximum-revenue tariff. Moreover, due to the higher tariff rate that leads to the high degree of privatisation, the optimum-welfare tariff generates greater optimal privatisation than the maximum-revenue tariff does. Lastly, when the gap between the number of domestic private firms and that of their foreign counterparts becomes larger, the optimum-welfare tariff will exceed the maximum-revenue tariff.

Suggested Citation

  • Tien-Der Han & Ruochen Li, 2024. "Optimal privatisation, and optimum-welfare and maximum-revenue tariffs," Economic and Political Studies, Taylor & Francis Journals, vol. 12(2), pages 220-234, April.
    • Handle: RePEc:taf:repsxx:v:12:y:2024:i:2:p:220-234
    DOI: 10.1080/20954816.2023.2276968
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