Optimal Privatisation Policy under Private Leadership in Mixed Oligopolies

We discuss optimal privatisation policies in mixed oligopolies in which a public firm is the Stackelberg follower (private leadership). We find that under constant marginal cost, the optimal degree of privatisation is zero. When the marginal cost is increasing, however, the optimal degree is never zero, and full privatisation can be optimal. These results suggest that the optimal privatisation policy depends on the cost conditions. We also find that the optimal degree of privatisation is substantially lower under private leadership than in the simultaneous-move model when there is no cost difference between public and private firms.

Privatization Neutrality Theorem in Free Entry Markets

It is known that if the number of entering firms is endogenous (free entry markets), privatization is not necessarily welfare neutral in mixed oligopolies under a uniform production subsidy policy. We revisit this problem by considering another policy tool, the output floor regulation. We investigate three free entry models with different time structures, a Cournot and two Stackelberg models. We find that neutrality is restored in free entry markets under the optimal output floor regulation, regardless of the time structure.

International Tariffs in a Mixed Oligopoly with Research Spillovers

This paper merges three strands of the literature – industrial organization, international trade, and economics of technical change – to examine the effect of tariffs on international mixed oligopolies which conduct research and development (R&D) that is prone to spillovers. Mixed oligopolies are prevalent in the defense sector, among other sectors. Using a two-stage sequential game with R&D in the first stage and production in the second stage, results show that higher tariffs reduce outputs of both the domestic public firm and foreign private firms, and private R&D. Effects on domestic R&D and welfare, and profits of foreign private firms depend upon spillovers. Within a large range of research spillovers, higher tariffs can in fact lower welfare. Some of these findings are different from traditional oligopolies and from models that ignore research spillovers. Policy implications are discussed.