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Strategic privatization and regulation policy in mixed markets

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  • CLAUDE, Denis
  • HINDRIKS, Jean

Abstract

In this paper we consider mixed oligopoly markets for differentiated goods where private and public firms compete either in prices or quantities. We then study the welfare effect of privatization interpreted as partial strategic delegation of the public firm to a private manager withprofit concern. It is shown that partial privatization improves welfare with quantity competition when goods are substitutes, and with price competition when goods are complements. However full privatization (complete delegation to private manager) can never be optimal. It isalso shown that the public firm can make more profit than the private firm in equilibrium, and that this possibility is more likely under quantity competition. Turning to market regulation policy, we find: (i) that public and private firms should be taxed the same; and (ii) that price regulation is better than quantity regulation.

Suggested Citation

  • CLAUDE, Denis & HINDRIKS, Jean, 2005. "Strategic privatization and regulation policy in mixed markets," LIDAM Discussion Papers CORE 2005015, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    • Handle: RePEc:cor:louvco:2005015
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    Cited by:

    1. Denis Claude & Mabel Tidball, 2010. "Efficiency inducing taxation for polluting oligopolists: the irrelevance of privatization," Economics Bulletin, AccessEcon, vol. 30(4), pages 2946-2954.
    2. Oscar Amerighi & Giuseppe De Feo, 2000. "On the FDI-Attracting Property of Privatization," Working Papers 3_214, Dipartimento di Scienze Economiche e Statistiche, Università degli Studi di Salerno.
    3. Capuano, Carlo & De Feo, Giuseppe, 2009. "On Public Inefficiencies in a Mixed Duopoly," SIRE Discussion Papers 2009-35, Scottish Institute for Research in Economics (SIRE).
    4. Heywood, John S. & McGinty, Matthew, 2011. "Cross-border mergers in a mixed oligopoly," Economic Modelling, Elsevier, vol. 28(1), pages 382-389.
    5. Denis Claude & Mabel Tidball, 2010. "Efficiency inducing taxation for polluting oligopolists: the irrelevance of privatization," Post-Print hal-02655045, HAL.
    6. Susumu Cato & Toshihiro Matsumura, 2013. "Long-Run Effects of Tax Policies in a Mixed Market," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 69(2), pages 215-240, June.
    7. Koji Okuguchi, 2012. "General Analysis of Cournot Mixed Oligopoly with Partial Privatization," Eurasian Economic Review, Springer;Eurasia Business and Economics Society, vol. 2(1), pages 48-62, June.
    8. John S. Heywood & Guangliang Ye, 2009. "Delegation in a mixed oligopoly: the case of multiple private firms," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 30(2), pages 71-82.
    9. Denis Claude & Mabel Tidball, 2010. "Efficiency inducing taxation for polluting oligopolists: the irrelevance of privatization," Economics Bulletin, AccessEcon, vol. 30(4), pages 2946-2954.
    10. Denis Claude & Mabel Tidball, 2010. "Efficiency inducing taxation for polluting oligopolists: the irrelevance of privatization," Economics Bulletin, AccessEcon, vol. 30(4), pages 2946-2954.

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