Mixed oligopoly, subsidization and the order of firm's moves: the relevance of privatization

A series of previous papers demonstrate that there are no consequences from privatization in a mixed oligopoly when the government uses a subsidy to ensure first best. This conclusion depends upon the assumption that privatization results in a simultaneous move oligopoly. If instead privatization results in a public leader becoming a private leader, the optimal subsidy, output and welfare are all reduced. (C) 2004 Elsevier B.V. All rights reserved.