PRIVATIZATION AND GOVERNMENT PREFERENCE IN A BERTRAND MODEL

We will consider a mixed Bertrand duopoly model (that means, two firms decide simultaneously their prices for a substitutable good) to study the relationship between the privatization of a state-owned public firm and government preferences for tax revenue. In the model, we assume that the government imposes a specific tax rate on the quantity produced by each firm. Furthermore, the public firm aims to maximize social welfare, whereas the governmentâĂŹs objective function is a weighted sum between social welfare and tax revenue. Of course, the private firm aims to maximize its own profit. We also present comparative static results. keywords: Modeling, Optimization, Industrial Organization, Game Theory.