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A low willingness to pay in a duopoly a la Hotelling: The role of the public firm

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  • Stefano Quarta

Abstract

The purpose of this paper is to analyze the role of the public firm in a spatial duopoly model a la Hotelling in the case of a low willingness to pay. We find that the presence of a public firm has the well known regulatory function in a market with a relative high willingness to pay; it is irrelevant in a market with a medium level of the willingness to pay; the relevance is for a low willingness to pay, where it ensures the full market coverage (as a result of the standard welfare maximization); finally, if the willingness to pay is very low, the public firm ensures a higher, but not full, market coverage with respect to the pure private case. Finally, we find that, for a low willingness to pay, the presence of the public firm is not sufficient to guarantee the optimal market configuration, so that the efficient level of welfare.

Suggested Citation

  • Stefano Quarta, 2019. "A low willingness to pay in a duopoly a la Hotelling: The role of the public firm," EERI Research Paper Series EERI RP 2019/12, Economics and Econometrics Research Institute (EERI), Brussels.
    • Handle: RePEc:eei:rpaper:eeri_rp_2019_12
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    More about this item

    Keywords

    Mixed duopoly; full market coverage; low willingness to pay; efficient welfare.;
    All these keywords.

    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D71 - Microeconomics - - Analysis of Collective Decision-Making - - - Social Choice; Clubs; Committees; Associations

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