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MIXED DUOPOLY, PRODUCT DIFFERENTIATION AND COMPETITION *
Author(s) -
KITAHARA MINORU,
MATSUMURA TOSHIHIRO
Publication year - 2013
Publication title -
the manchester school
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.361
H-Index - 42
eISSN - 1467-9957
pISSN - 1463-6786
DOI - 10.1111/j.1467-9957.2012.02329.x
Subject(s) - product differentiation , duopoly , economics , microeconomics , competition (biology) , social welfare , profit (economics) , bertrand competition , welfare , product market , product (mathematics) , private sector , industrial organization , market economy , oligopoly , cournot competition , incentive , geometry , mathematics , ecology , political science , law , biology , economic growth
We examine the relationship between the equilibrium price and the degree of product differentiation in a mixed duopoly in which a welfare‐maximizing public enterprise competes against a profit‐maximizing private firm. Existing works on private economy show that increased product differentiation mitigates price competition. We find that, in a mixed economy, increased product differentiation can accelerate competition when the demand is elastic. The private firm chooses to locate itself too close to the public firm (and thus makes the resulting degree of product differentiation too low) for social welfare, which never appears in the private economy.