ANALYSIS OF PRIVATIZATION IN STACKELBERG MIXED OLIGOPOLY

Sa？etak Mixed oligopoly with one welfare-maximizing public and several profit-maximizing private firms exists in many economies. De Fraja and Delbono (1989) have analysed mixed oligopoly taking into account how the public firm behaves vis-à-vis the private firms on the basis of a linear market demand function and symmetric firms. They have found that the social welfare is greater in Stackelberg mixed oligopoly where the public firm acts as a leader than in Cournot mixed oligopoly where all firms simultaneously determine their outputs. A partial public firm tries to maximize the weighted average of the social welfare and its profits. Under some conditions, partial privatization of a public firm leads to greater social welfare than Cournot mixed oligopoly where the public firm is fully public (see Matsumura (1998) for duopoly and Okuguchi (2012) for oligopoly). In this paper we will prove that neither partial nor full privatization of a public firm is optimal in a general Stackelberg mixed oligopoly where the public firm acts as a leader and all private firms as followers