Delegation in a Mixed Oligopoly: The Case of Multiple Private Firms

Managerial and Decision Economics, Vol. 30, No. 2, pp. 71-82, 2009

Posted: 6 Jan 2012 Last revised: 9 Jan 2012

See all articles by John S. Heywood

John S. Heywood

University of Wisconsin at Milwaukee

Guangliang Ye

Renmin University of China - Hanqing Institute

Date Written: 2009

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.

Suggested Citation

Heywood, John S. and Ye, Guangliang, Delegation in a Mixed Oligopoly: The Case of Multiple Private Firms (2009). Managerial and Decision Economics, Vol. 30, No. 2, pp. 71-82, 2009, Available at SSRN: https://ssrn.com/abstract=1980483

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)

Guangliang Ye (Contact Author)

Renmin University of China - Hanqing Institute ( email )

59 Zhongguancun Street
Beijing, 100872
China

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