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Delegation in a mixed oligopoly: the case of multiple private firms

✍ Scribed by John S. Heywood; Guangliang Ye

Publisher
John Wiley and Sons
Year
2009
Tongue
English
Weight
190 KB
Volume
30
Category
Article
ISSN
0143-6570

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✦ Synopsis

Abstract

Previous research examining mixed duopolies shows that the use of an optimal incentive contract for the public firm increases welfare and that privatization reduces welfare. We demonstrate that these results do not generalize to a mixed oligopoly with multiple private firms. We derive the optimal incentive contract for a public firm that weighs both profit and welfare and show that its use may either increase or decrease welfare depending on the number of private firms and the exact nature of costs. We also identify the conditions that determine whether or not privatizing the public firm facing an optimal incentive contract reduces welfare. Copyright Β© 2008 John Wiley & Sons, Ltd.

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