English, Article, Journal or magazine article edition: Mixed duopoly, privatization and the shadow cost of public funds Carlo, CAPUANO; Giuseppe, DE FEO

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Bookmark: http://trove.nla.gov.au/version/178146
Physical Description
  • preprint
Language
  • English

Edition details

Title
  • Mixed duopoly, privatization and the shadow cost of public funds
Author
  • Carlo, CAPUANO
  • Giuseppe, DE FEO
Physical Description
  • preprint
Notes
  • The purpose of this paper is to investigate the effect of privatization in a mixed duopoly, where a private firm complete in quantities with a welfare-maximizing public firm. We consider two inefficiencies of the public sector : a possible cost inefficiency and an allocative inefficiency due to the distortionary effect of taxation (shadow cost of public funds). Furthermore, we analyze the effect of privatization on the timing of competition by endogenezing the determiantion of simultaneous (Nash-Cournot) versus sequential (Stackelberg) games using the model developed by Hamilton and Slutsky (1990). The latter is especially relevant for the analysis of privatization, given that results and policy prescription emerged in the literature crucially rely on the type of competition assumed. We show that privatization has generally the effect of shifting from Stackelberg to Cournot equilibrium and that, absent efficiency gains privatization never increases welfare. Moreover, even when large efficiency gains are realized, an inefficient public firm may be preferred.
  • mixed oligopoly, privatization, endogenous timing, distortionary taxes
  • RePEc:ctl:louvec:2008015
Language
  • English
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