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INTER‐REGIONAL MIXED OLIGOPOLY WITH A VERTICAL STRUCTURE OF GOVERNMENT *
Author(s) -
TOMARU YOSHIHIRO,
NAKAMURA YASUHIKO
Publication year - 2012
Publication title -
australian economic papers
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.351
H-Index - 15
eISSN - 1467-8454
pISSN - 0004-900X
DOI - 10.1111/j.1467-8454.2012.00421.x
Subject(s) - oligopoly , welfare , local government , government (linguistics) , business , public enterprise , public policy , industrial organization , economics , market economy , microeconomics , economic system , public administration , economic growth , political science , linguistics , philosophy
This paper incorporates the vertical structure of governments into a mixed oligopoly model by considering the public firms owned by different government levels, namely, a state‐owned public firm and a local public firm. As in the existing literature, a state‐owned public firm is assumed to maximise the welfare of an entire country comprising two regions. On the other hand, a local public firm is assumed to maximise the welfare of only one region. In such a setting, we find that when the central and local governments independently consider whether to privatise their respective public firms, only the state‐owned public firm should be privatised. Furthermore, we show that for the welfare of a country, a mixed oligopoly with a vertical structure of government can be more desirable than a mixed oligopoly without it.