The welfare effects of nationalization in a mixed duopoly public transport market

Recently, many cities have launched new rail transit lines. Once these new rail transit lines start commercial operation, they will play important roles as competitors to conventional bus services. In this paper, the effects of nationalization on equilibria have been studied in a mixed duopoly public transport market, in which one publicly-owned rail transit operator competes with one private bus operator. Two numerical case studies show the nationalization of a rail transit company is always socially desirable both in Bertrand pricing game in the short run and in Nash non-cooperative game in the long run

Mixed oligopoly, vertical product differentiation and fixed quality-dependent costs

A private and a public firm face fixed quality-dependent costs of production and compete first in quality and then either in prices or in quantities. In the long run the public firm targets welfare maximization whereas the private firm maximizes profits. In the short run both firms compete in prices or quantities to maximize profits. Mixed competition is always socially desirable compared to a private duopoly regardless of the type of competition in the short run and the equilibrium quality ranking. In addition, mixed competition seems to be a more efficient regulatory instrument than the adoption of a minimum quality standard.vertical product differentiation, mixed oligopoly, quality, price and quantity competition

Mixed oligopoly, public firm behavior, and free private entry

© 2012 Elsevier B.V. All rights reservedWe analyze a mixed oligopoly with free entry by private firms, assuming that a public firm maximizes an increasing function of output, subject to a break-even constraint. We establish an irrelevance result: whenever a mixed oligopoly is viable, then aggregate output, aggregate costs and welfare are the same with and without the public firm. However, replacing a viable mixed oligopoly with a public monopoly yields higher net welfare. Implications for privatization policy are suggested

International Trade and Environmental Regulation

This dissertation is composed of three chapters regarding international trade and environmental regulation. The first chapter focuses on the relationship between port ownership and the port R\&D investment. I investigate whether a larger degree of private involvement in the port sector makes for a higher level of welfare, as well as an improvement in port performance. I establish the stage games to analyze the reciprocal international trade. The theoretical findings indicate that the endowment of population plays an essential role in choosing the optimal port ownership. In the second chapter, I investigate the effect of port pollution regulation on port ownership. I incorporate the regulation tax on emissions from port cargo handling into the international duopoly trade model. The results of the stage games suggest the same ownership of the ports in both countries. I also extend the categories of port structures to include the transfer of port ownership to the other country. The policy implication is to have the small country own both ports, which is opposite to the port governance in reality. In the third chapter, I explore the equilibrium port ownership structures without other policy issues or regulation on the port sector being considered. The influence of country size per se suggests that a small country should privatize its port in the context of a privatized port in the large country. For a large country, it is better to choose a type of ownership different from the small country\u27s. In addition, it is the country whose population is greater than a third of the scale in the other country that should own both ports

Public monopoly versus mixed oligopoly: product differentiation and social efficiency

In this paper, we consider a mixed oligopoly market in which a public firm and private firms compete, in particular, in which private entrants are allowed to enter a monopoly market by a public incumbent who maximizes social welfare. It has been widely believed that the public firm has advantage over private firms because the former who maximizes social welfare can charge a lower price than the latter who maximizes its own profit. However, in a Hotelling model of product differentiation, we obtain the results that both the public firm and private firms charge the same price in equilibrium, and more importantly, that the equilibrium prices may rise as a result of competition, thereby lowering the consumer surplus, if the transportation cost is high enough. We also show that if a private firm enters the market by choosing its own degree of differentiation, it will prefer neither maximum differentiation nor minimum differentiation in the case that the public incumbent is myopic in the sense that it cannot anticipate entry as well as in the case that it is far-sighted enough to anticipate entry. This draws an important policy implication in the market of Korean housing guarantee services

Privatization policies by national and regional governments

In order to analyze the privatization policies undertaken by the national and regional governments, we consider a horizontal differentiation model with price competition in which a country consists of two regions of different sizes. We show that public-sector intervention by either the national or regional government is essential for achieving the social optimum, because a private duopoly does not achieve the social optimum. However, not all public interventions in firms are better than the private duopoly. On the other hand, the preferences of consumers and firms about privatization policy are completely opposite. Finally, the privatization policies of regional governments are completely opposite from one region to the other, and do not coincide with that of the national government. Overall, this paper shows that the relative size of regions is an important feature in the design of the privatization policies implemented by national and regional governments

Optimal Partial Privatization in the Presence of Foreign Competition: The Role of Efficiency Differentials and Unemployment

This paper studies the privatization policy on a domestic state-owned enterprise (SOE), by incorporating the features of unemployment and efficiency differentials-both exogenous and endogenous-between the SOE and a foreign-owned firm, in a partial-equilibrium mixed oligopoly setting. We characterize and compare the optimal privatization policies under different scenarios, and find that the presence/absence of labor efficiency differentials and unemployment interact in an interesting way. In addition, when there is unemployment, the trading of between labor inefficiency and unemployment in privatization decision depends on the magnitude of damage on the labor efficiency due to an increase in state ownership of the SOE, but not so under full employment

Industry structure and regulation

As private firms become increasingly involved in the development of key infrastructure, redefining the role of government from that of serviceprovider to regulator presents both challenges and opportunities. The factors that give rise to sector reforms color how much policymakers invest in regulatory design during the reform process. Nevertheless, two factors are essential to sustainable sector and regulatory reform. First, the right structure must be established for the industry concerned, a structure that allows competition appropriate for that industry. Second, the objectives of regulation must be well defined, with a clear distinction between policymaking, policy implementation, and operations. The extent to which competition can be harnessed to help make regulation efficient, effective, and sustainable depends on the intrinsic technical characteristics of the sector. Each decision affects the sustainability of the regulatory regime in the face of the threat of regulatory capture (both political and commercial). Careful regulatory design is crucial not only for successful sectoral reform but also to balance the interests of various actors (government, consumers, developers, investors, and financiers). One model that has been relatively successful combines new entry, unbundled services, and the unambiguous spelling out of the legal rights and duties for both public and private service providers, administered by an autonomous regulatory authority. Problems with regulation often result as much from inadequate attention to sector structure and fostering competition as from weaknesses in the regulatory authority's institutional capacity. As for the tools of regulation, despite differences in some details between licenses and concessions (and their many contractual variations), these are basically instruments that establish the rights and obligations of contracting parties. Choices about where these rights and obligations are located in the legal hierarchy are shaped by a country's institutional capacity and legal traditions. But the existence of instruments to establish those rights and obligations does not eliminate the need for institutionsto administer them, and thus carry out the regulatory function. Establishing effective sectorwide regulation can be difficult in a developing country, but it is necessary. Policymakers will be able to create effective regulatory regimes where adequate attention is given to sector structure, competition, and institution-building.Environmental Economics&Policies,Trade Finance and Investment,Knowledge Economy,ICT Policy and Strategies,Decentralization,Environmental Economics&Policies,Administrative&Regulatory Law,ICT Policy and Strategies,Water and Industry,Knowledge Economy

Regulating and Deregulating the Public Utilities 1830-2010

History can provide invaluable insights into important issues of the economic and social regulation of utilities, and offer lessons towards future debates. But the history of utility regulation – which speaks of changing, diverse and complex experiences around the world – was, unfortunately, sidelined or marginalised when economists and policymakers enthusiastically embraced the question of how to reform the utilities from the 1970s. This paper provides an overview of the three, overarching, `waves' of utility regulation from the nineteenth century to the present, documenting how, when and why the ways in which the roles of the state, the market and firms altered over time. It then contextualises and explains the main contributions of each of the papers included in this special issue of Business History, which cover energy, communications, water, transportation and other urban infrastructure regulation, across Western Europe, the United States and Australia

Pollution, partial privatization and the effect of ambient charges: price competition

Nonpoint pollution arises from dispersed sources and lacks direct monitoring. Observing individual abatement levels or discharges is generally impractical. This paper addresses the economic incentives for controlling nonpoint pollution, which differs from point source pollution due to difficulties in monitoring individual polluting actions. The paper examines a mixed Bertrand duopoly model where there are two firms: a private firm and a partially privatized public firm that is jointly owned by the public and private sectors. The model of the paper uses ambient charges as a policy measure for reducing industrial nonpoint source pollution. This paper shows that ambient charges are an effective policy measure