Seminar Abstract

【Endogenous Cost Differentials between Public
  and Private Enterprises: A Mixed Duopoly Approach】

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Speaker: 松島 法明
Affiliation: 信州大学 経済学部

Date and Time: 2002.10.29 (Tue), 4:30 - 6:00 p.m.

Place: 3F1136

Chair: 江口 匡太

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Abstract: 

We investigate a mixed duopoly, where a state-owned
welfare-maximizing public firm competes against a
profit-maximizing private firm. We use a Hotelling-type spatial
model which presents product differentiation. We endogenize
production costs by introducing cost-reducing activities. We show
that the private firm's cost becomes lower than the public firm's
because the private firm  engages in excessive strategic
cost-reducing activities. Even though each firm's cost is
heterogenous, the locations of the firms are socially efficient,
given the cost differentials. Privatization of the public firm
would improve welfare because it mitigates the loss due to
excessive cost-reducing investments.