Mixed Duopoly with a Partial-Delegated-Public Firm

Abstract

We compare the welfare results of mixed duopoly model where a firm can be private, public or partial-delegated-public. We consider two types of partial-delegated-public firms. In partial-delegated-public with \textit{location delegation}, the firm chooses location to maximize its profit while the social planner chooses price to maximize social surplus. Partial-delegated-public firm with \textit{price delegation} is the opposite where the firm chooses price to maximize its profit. We find significant differences in equilibrium outcomes both between the two types of partial-delegated-public firms, and between the partial-delegated-public firms and the purely private/public firms. While equilibrium prices in the partial-delegated-public firm cases lie in between those in the extreme cases (purely private or purely public), the private firm's profit may be higher when its rival is a partial-delegated-public firm rather than a purely private/public firm. We also find a 'trade-off' within the two partial-delegated-public firm cases: social surplus is higher under location delegation, but consumer surplus and profit of the partial-delegated-public firm are higher under price delegation.