Stackelberg mixed oligopoly with asymmetric subsidies

Abstract

In a mixed oligopoly, when the public leader becomes a private leader and the government provides output subsidies, then privatization causes the optimal subsidy, profits and welfare to fall [Economics Letters 83 (2004) 411]. We show instead that if the leader and the followers receive asymmetric, rather than symmetric subsidies, the first-best optimum can be restored. In this case, privatization bears no consequences on the followers' subsidy, output and welfare