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Public Stackelberg Leadership in a Mixed Oligopoly with Foreign Firms

15 Pages Posted: 28 Dec 2002  

Kenneth Fjell

Norwegian School of Economics (NHH)

John S. Heywood

University of Wisconsin at Milwaukee

Abstract

This is the first paper to consider a mixed oligopoly in which a public Stackelberg leader competes with both domestic and foreign private firms. The welfare maximising leader is shown to always produce less than under previous Cournot conjectures. Introducing leadership also alters previous public pricing rules resulting in prices that may be either greater than or less than marginal cost depending on the relative number of domestic firms. Furthermore, entry of a foreign firm will increase welfare only when the relative number of domestic firms is small, but that share is shown to be larger than has been indicated without leadership. Unlike previous models, the influence on public profit of a foreign acquisition is ambiguous and is related to the relative number of domestic firms. Finally, the consequences of privatisation are shown, for the first time, to depend on the relative number of domestic firms.

Suggested Citation

Fjell, Kenneth and Heywood, John S., Public Stackelberg Leadership in a Mixed Oligopoly with Foreign Firms. Australian Economin Papers, Vol. 41, pp. 267-281, 2002. Available at SSRN: https://ssrn.com/abstract=324640

Kenneth Fjell (Contact Author)

Norwegian School of Economics (NHH) ( email )

Helleveien 30
Bergen, NO-5045
Norway

John S. Heywood

University of Wisconsin at Milwaukee ( email )

3210 N. Maryland Avenue, Bolton Hall 802
Bolton Hall 802
Milwaukee, WI 53211
United States
414-229-4437 (Phone)
414-229-3860 (Fax)

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