Partial Privatization in Price-Setting Mixed Duopolies with Complementary Goods

Kazuhiro Ohnishi

doi:10.4236/me.2011.21007

Abstract

We consider a domestic (resp. international) mixed duopoly model in which a domestic public firm and a domestic (resp. foreign) private firm produce complementary goods. First, the domestic government chooses the level of privatization to maximize domestic social welfare. Second, observing the level of privatization, the firms simultaneously and independently choose prices. We present the equilibrium outcomes of the two mixed duopoly models and shows that our result is in marked contrast to that of the price-setting mixed du-opoly model with substitute goods.

Highlights

IntroductionThe theoretical analysis of partial privatization of stateowned public firms has received significant attention in recent years and has been extensively studied by many economists, such as [1-17]
The theoretical analysis of partial privatization of stateowned public firms has received significant attention in recent years and has been extensively studied by many economists, such as [1-17].these studies analyze partial privatization in mixed duopoly competition in which public and private firms produce substitutable goods
We present the equilibrium outcomes of the two mixed duopoly models and shows that our result is in marked contrast to that of the price-setting mixed duopoly model with substitute goods

Summary

Introduction

The theoretical analysis of partial privatization of stateowned public firms has received significant attention in recent years and has been extensively studied by many economists, such as [1-17]. These studies analyze partial privatization in mixed duopoly competition in which public and private firms produce substitutable goods. We extend the analysis of Ohnishi [17], which investigates a price-setting mixed duopoly model involving a domestic public firm and a domestic private firm to reassess the welfare effect of partial privatization. Ohnishi demonstrates that partial privatization is not a reasonable choice for the government that wishes to maximize social welfare We consider both domestic and international mixed duopoly models with complementary goods.[1] We consider the following situation.

Domestic Mixed Duopoly

International Mixed Duopoly

Conclusions