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Journal of Industry, Competition and Trade

, Volume 17, Issue 4, pp 387–398 | Cite as

Inefficient but Robust Public Leadership

  • Toshihiro Matsumura
  • Akira OgawaEmail author
Article

Abstract

We investigate endogenous timing in a mixed duopoly in a differentiated product market. We find that private leadership is better than public leadership from a social welfare perspective if the private firm is domestic, regardless of the degree of product differentiation. Nevertheless, the public leadership equilibrium is risk-dominant, and it is thus robust if the degree of product differentiation is high. We also find that regardless of the degree of product differentiation, the public leadership equilibrium is risk-dominant if the private firm is foreign. These results may explain the recent revival of public financial institutions in Japan.

Keywords

Public financial institutions Differentiated products Risk dominance Stackelberg 

JEL Classification

H42 L13 

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Copyright information

© Springer Science+Business Media New York 2017

Authors and Affiliations

  1. 1.Institute of Social ScienceThe University of TokyoTokyoJapan
  2. 2.College of Liberal ArtsInternational Christian UniversityMitaka-shiJapan

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