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Mixed Duopoly, Product Differentiation and Competition

15 Pages Posted: 14 Aug 2013  

Minoru Kitahara

University of Tokyo - Faculty of Economics

Toshihiro Matsumura

University of Tokyo - Institute of Social Science

Date Written: September 2013

Abstract

We examine the relationship between the equilibrium price and the degree of product differentiation in a mixed duopoly in which a welfare‐maximizing public enterprise competes against a profit‐maximizing private firm. Existing works on private economy show that increased product differentiation mitigates price competition. We find that, in a mixed economy, increased product differentiation can accelerate competition when the demand is elastic. The private firm chooses to locate itself too close to the public firm (and thus makes the resulting degree of product differentiation too low) for social welfare, which never appears in the private economy.

Suggested Citation

Kitahara, Minoru and Matsumura, Toshihiro, Mixed Duopoly, Product Differentiation and Competition (September 2013). The Manchester School, Vol. 81, Issue 5, pp. 730-744, 2013. Available at SSRN: https://ssrn.com/abstract=2309845 or http://dx.doi.org/10.1111/j.1467-9957.2012.02329.x

Minoru Kitahara

University of Tokyo - Faculty of Economics ( email )

7-3-1 Hongo, Bunkyo-ku
Tokyo 113-0033
Japan

Toshihiro Matsumura

University of Tokyo - Institute of Social Science ( email )

Hongo 7-3-1
Tokyo, TOKYO 113-0033
Japan

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