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Optimal Trade and Privatization Policies in an International Mixed Market
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- Authors
- Issue Date
- 2011-01
- Citation
- Seoul Journal of Economics, Vol.24 No.1, pp. 51-71
- Keywords
- Privatization policy ; Trade policy ; Production subsidy ; Import tariff ; Mixed Cournot oligopoly ; Mixed Stackelberg oligopoly
- Abstract
- This paper examines the optimal trade and privatization policies
in an international mixed market where a domestic public firm
competes against domestic and foreign private firms. We consider a
trade policy combination of production subsidy and import tariff,
and compare the optimal trade and privatization policies under either
Cournot or Stackelberg competition. We find that the optimal trade
policies consist of a domestic production subsidy and an import
tariff, which are identical under the two regimes regardless of the
competition pattern. However, the optimal privatization policy depends
on the competition patterns, whether Cournot or Stackelberg
competition. In particular, the optimal privatization policy under
Cournot competition is complete privatization, whereas that under
Stackelberg competition is full nationalization. Finally, we show that
if the government can only use a single trade policy instrument, the
production subsidy gives a better social welfare benefit than the
import tariff.
- ISSN
- 1225-0279
- Language
- English
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