Tuesday, January 4, 2011
Posted by D. Daniel Sokol
Alessandra Chirco (University of Salento, Lecce, Italy) and Marcella Scrimitore (University of Salento, Lecce, Italy; The Rimini Centre for Economic Analysis (RCEA), Rimini, Italy) write on Price Competition in International Mixed Oligopolies.
ABSTRACT: In this paper we analyze the effects of international competition in a mixed oligopoly framework, with price competition and differentiated products. The properties of equilibria, and the impact of policy measures such as privatizations and cross-border acquisitions, are studied both in a single-country and in a two-country framework, under the hypothesis that all firms share the same linear technology. Besides showing that the international competition in a mixed market allows for efficiency gains which are consistent with binding budget constraints for the public firm, we identify the market structures and the competitive environment which support welfare enhancing privatization policies, independently of any exogenous or endogenous cost differential between public and private producers. In particular, we suggest that the cross-country distribution of firms, the degree of product substitutability and the overall densit! y of the market are the key elements in the assessment of the desirability of public ownership.