Mixed Duopoly, Privatization, Subsidization and Partial Foreign Ownership
Creators
- 1. Department of Economics, Institute for Economic Sciences, Osaka, Japan
Description
The seminal work by White (1996) examines the welfare effects of production subsidies in a mixed Cournot oligopoly market where a state-owned public firm competes with fully domestic-owned private firms, and presents the following two main results. First, if production subsidies are utilized only before privatization, domestic economic welfare is always lowered by privatization. Second, if production subsidies are utilized before and after privatization, then domestic economic welfare is not changed by privatization. This paper examines the welfare effects of production subsidies in a mixed Cournot duopoly model where a state-owned public firm competes with a private firm that is partially foreign owned. The paper presents the following two main results. First, if subsidies are used only before privatization, then there is a reduction in domestic economic welfare. Second, if subsidies are used before and after privatization, then domestic economic welfare is raised by privatization. The paper finds that the second result is in contrast with that obtained by White (1996).
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Additional details
References
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- Ohnishi, K. (2020). Price-setting mixed duopoly, subsidization and the order of firms' moves: the relevance of privatization. Economics Bulletin 40 (4), 3071-3076.
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- Fernández-Ruiz, J. (2009). Managerial delegation in a mixed duopoly with a foreign competitor. Economics Bulletin, 29 (1), 90-99.