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Mixed Duopoly with a Partial‐Delegated‐Public Firm
Author(s) -
Shuai Jie
Publication year - 2017
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/manc.12150
Subject(s) - delegation , social planner , economics , microeconomics , partial equilibrium , social welfare , profit (economics) , welfare , economic surplus , public sector , business , market economy , general equilibrium theory , economy , law , management , political science
We compare the welfare results of mixed duopoly model where a firm can be private, public or partial‐delegated‐public. We consider two types of partial‐delegated‐public firms. In partial‐delegated‐public with location delegation , the firm chooses location to maximize its profit while the social planner chooses price to maximize social surplus. Partial‐delegated‐public firm with price delegation is the opposite where the firm chooses price to maximize its profit. We find significant differences in equilibrium outcomes both between the two types of partial‐delegated‐public firms, and between the partial‐delegated‐public firms and the purely private/public firms. While equilibrium prices in the partial‐delegated‐public firm cases lie in between those in the pure cases (purely private or purely public), the private firm's profit may be higher when its rival is a partial‐delegated‐public firm rather than a purely private/public firm. We also find a ‘trade‐off’ within the two partial‐delegated‐public firm cases: social surplus is higher under location delegation, but consumer surplus and profit of the partial‐delegated‐public firm are higher under price delegation.