Ownership Versus Timing of the Game

10 Pages Posted: 23 Dec 2007

See all articles by Richard C. Cornes

Richard C. Cornes

Australian National University (ANU) - Faculty of Economics & Commerce; CESifo (Center for Economic Studies and Ifo Institute)

Mehrdad Sepahvand

University of Nottingham - School of Economics

Abstract

This study examines the impact of timing of the game on the welfare gains of privatization in the presence of strategic trade policy. We argue that only if the public enterprise acts as a Cournot player will it generate an additional distortion that could outweigh the distortion caused by the oligopolistic behavior of private firms. But with a first-mover advantage it can serve as an effective regulatory device comparable with a production subsidy. We further show that, in the presence of strategic trade policy, Cournot assumptions are inconsistent with the firms preferences over the timing of the game. As public Stackelberg leadership is a sub-game Nash equilibrium of the extended game with endogenous order of moves, we conclude that it is the timing of the game rather than firms ownership structure which is responsible for the inefficiency of an international mixed market found by earlier studies.

Suggested Citation

Cornes, Richard C. and Sepahvand, Mehrdad, Ownership Versus Timing of the Game. Australian Economic Papers, Vol. 46, Issue 4, pp. 305-314, December 2007. Available at SSRN: https://ssrn.com/abstract=1077974 or http://dx.doi.org/10.1111/j.1467-8454.2007.00321.x

Richard C. Cornes

Australian National University (ANU) - Faculty of Economics & Commerce ( email )

Canberra, Australian Capital Territory 2601
Australia

CESifo (Center for Economic Studies and Ifo Institute) ( email )

Poschinger Str. 5
Munich, DE-81679
Germany

Mehrdad Sepahvand

University of Nottingham - School of Economics ( email )

University Park
Nottingham, NG7 2RD
United Kingdom

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