Price control and privatization in a mixed duopoly with a public social enterprise

We explore the issue of the optimal degree of privatization for a public firm that does not need to care about its rival's profit completely. We find that the optimal privatization of a public social enterprise under exogenous price control depends on the level of the regulated price. Namely, w...

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Bibliographic Details
Published in:Journal of economics (Vienna, Austria) Austria), 2018-05, Vol.124 (1), p.57-73
Main Authors: Chang, Chih-Wei, Wu, Dachrahn, Lin, Yan-Shu
Format: Article
Language:English
Subjects:
Duopoly
Economic models
Economic theory
Economic Theory/Quantitative Economics/Mathematical Methods
Economics
Economics and Finance
Game Theory
Macroeconomics/Monetary Economics//Financial Economics
Microeconomics
Price regulations
Privatization
Public Finance
Social and Behav. Sciences
Social welfare
Wage & price controls
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Summary:We explore the issue of the optimal degree of privatization for a public firm that does not need to care about its rival's profit completely. We find that the optimal privatization of a public social enterprise under exogenous price control depends on the level of the regulated price. Namely, when the regulated price is low (medium, high), the optimal privatization is partial privatization (complete privatization, completely public owned). If the price control is optimized by maximizing social welfare, then the optimal privatization is complete privatization. For the case of the traditionally defined public firm, its optimal privatization is completely public owned when the price control is exogenously given. If the price control is endogenously determined, then privatization policy is redundant.
ISSN:0931-8658
1617-7134
DOI:10.1007/s00712-017-0564-2