This paper shows the possibility that, under certain conditions, it can be socially optimal for the public firm not to privatise its whole production capacity but to retain a part of it, even when private operation of the production facilities is strictly more cost-efficient than public operation.

We study the development of an industry-evolution of capacity, production and prices- in a continuous-time real-options model under various assumptions on competition. Investment takes the form of sequential acquisition of indivisible units of capacity. As benchmarks, we determine the optimal...

This paper studies a strategic market game where agents fragment their bids on different markets. Simple conditions for existence of an interior equilibrium point are provided. In equilibrium, all agents are active on the same markets and prices are identical across markets, so that all...

In an oligopoly supergame, firms' actions in prices and quantities are subject to non-negativity constraints. These constraints can obstruct the practicability of optimal punishment (a la Abreu (1986), Lambson (1987), and Hackner (1996)) in sustaining tacit collusion. Noting that the prospect of...

We consider a market in which a public firm completes against private ones, and ask what happens when the public firms is privatized. In the short run, privatization is harmful because prices rise: the disciplinary role of the public firm is lost. In the long run, privatization, leads to further...

In a vertical differentiation model, we investigate whether the property of finiteness holds when the average cost function depends on the quantity. We prove that this property holds when the cost function has increasing returns. In the case of cost functions with decreasing returns, we prove...

We analyze the strategic pricing and informative advertising decisions made by firms in duopolistic contexts. We show that whether the products are substitutes or complements, these exist strategic settings in which firms keep potential consumers uninformed about their products even if...

It is shown that a fixed cost of nominal price changes enhances the ability of firms to collude in an ologopolistic market for a homogeneous good. Nevertheless, harsh price competition with firms making no profit remains a possible outcome. The analysis focuses on stable symmetric steady states...

This paper analyses the design of hospital reimbursement in an industry with imperfect competition, scarcity of labour and socially costly government transfers. We find that prospective payment not only increases the quantity of hospital care, but also the quality if quality improvements are...