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Public vs. Private Investments In Network Industries

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  • Jean-Marc Zogheib

    (EconomiX - EconomiX - UPN - Université Paris Nanterre - CNRS - Centre National de la Recherche Scientifique)

  • Marc Bourreau

Abstract

We study the competition between a private firm and public firms on prices and investment in new infrastructures. While the private firm maximizes its profits, public firms maximize the sum of their profits and consumer surplus, subject to a budget constraint. We consider two scenarios of public intervention, with a national public firm and with local public firms. In a monopoly benchmark, we find that the national public firm has the highest coverage and charges a uniform price allowing cross-subsidies between high-cost and low-cost areas. Moreover, the private firm covers as much as local public firms. In a mixed duopoly, a stronger competitive pressure drives firms' prices up while it drives down (up) the national public (private) firm's coverage.

Suggested Citation

  • Jean-Marc Zogheib & Marc Bourreau, 2021. "Public vs. Private Investments In Network Industries," Working Papers hal-04159754, HAL.
    • Handle: RePEc:hal:wpaper:hal-04159754
    Note: View the original document on HAL open archive server: https://hal.science/hal-04159754
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    More about this item

    Keywords

    public firms; investment; network industries; mixed duopoly.;
    All these keywords.

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • H44 - Public Economics - - Publicly Provided Goods - - - Publicly Provided Goods: Mixed Markets
    • L20 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - General
    • L33 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Comparison of Public and Private Enterprise and Nonprofit Institutions; Privatization; Contracting Out

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