Template-Type: ReDIF-Paper 1.0
Author-Name: Carlo  Capuano
Author-Name-First: Carlo 
Author-Name-Last: Capuano
Author-Email: carlo.capuano@unina.it
Author-Workplace-Name: Department of Economics, University of Naples Federico II, Complesso Universitario di Monte S.Angelo
Author-Name: Giuseppe  De Feo
Author-Name-First: Giuseppe 
Author-Name-Last: De Feo
Author-Email: giuseppe.defeo@strath.ac.uk
Author-Workplace-Name: Department of Economics, University of Strathclyde
Title: On Public Inefficiencies in a Mixed Duopoly
Abstract: The aim of this paper is to investigate the welfare effect of a change in the public firm's objective function in oligopoly when the government takes into account the distortionary effect of rising funds by taxation (shadow cost of public funds). We analyze the impact of a shift from welfare- to profit-maximizing behaviour of the public firm on the timing of competition by endogenizing the determination of simultaneous (Nash-Cournot) versus sequential (Stackelberg) games using the game with observable delay proposed by Hamilton and Slutsky (1990). Differently from previous work that assumed the timing of competition, we show that, absent efficiency gains, instructing the public firm to play as a private one never increases welfare. Moreover, even when large efficiency gains result from the shift in public firm's objective, an inefficient public firm that maximizes welfare may be preferred.
Length: 26 pages
Creation-Date: 2009-07
Revision-Date: 
Publication-Status: 
File-URL: http://www.strath.ac.uk/media/1newwebsite/departmentsubject/economics/research/researchdiscussionpapers/2009/09-16GDF.pdf
File-Format: Application/pdf
Number: 0916
Classification-JEL: L1; L13; L32; L33.
Keywords: Mixed oligopoly; Nash equilibria; Endogenous Timing; Distortionary taxes
Handle: RePEc:str:wpaper:0916