Privatization and Government Preferences in a Mixed Duopoly: Stackelberg Versus Cournot
We analyse the relationship between the privatization of a public firm and government preferences for tax revenue, by considering a (sequential) Stackelberg duopoly with the public firm as the leader. We assume that the government payoff is given by a weighted sum of tax revenue and the sum of consumer and producer surplus. We get that if the government puts a sufficiently larger weight on tax revenue than on the sum of both surpluses, it will not privatize the public firm. In contrast, if the government puts a moderately larger weight on tax revenue than on the sum of both surpluses, it will privatize the public firm. Furthermore, we compare our results with the ones previously published by an other author obtained in a (simultaneous) Cournot duopoly.
KeywordsStackelber duopoly Cournot duopoly Mixed duopoly Privatization Tax rate
The authors would like to thank ESEIG and Polytechnic Institute of Porto for their financial support.
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