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Optimal Privatization and Subsidization Policies in a Mixed Duopoly: Relevance of a Cost Gap

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This study considers subsidization and privatization policies in a mixed duopoly with one public firm and one private firm. The special feature of this study is that privatization can reduce the cost gap between the firms. We show that the optimal subsidy yields the efficient production allocation if privatization is not implemented. However, once the public firm is privatized, it overproduces under the optimal subsidy. Moreover, partial privatization is optimal unless privatization significantly reduces the cost gap.
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Keywords: COST GAP; MIXED DUOPOLY; PARTIAL PRIVATIZATION; SUBSIDIZATION

Document Type: Research Article

Publication date: 01 December 2018

This article was made available online on 16 March 2018 as a Fast Track article with title: "Optimal Privatization and Subsidization Policies in a Mixed Duopoly: Relevance of a Cost Gap".

More about this publication?
  • Founded as Zeitschrift für die gesamte Staatswissenschaft in 1844.

    As one of the oldest journals in the field of political economy, the Journal of Institutional and Theoretical Economics (JITE) deals traditionally with the problems of economics, social policy, and their legal framework. JITE is listed in the Journal of Economic Literature, the Social Science Citation Index, the International Bibliography of the Social Sciences, and COREJ.

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    From 2013 on all accepted articles are published in an Online First version (in their final layout) to make them searchable and citable by their DOI immediately after peer review and acceptance. Once the article is published in an issue of the journal, the Online First version will be removed.

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