Privatization and government preference in a public Stackelberg leader duopoly

Ferreira, Fernanda A.; Ferreira, Flávio

http://hdl.handle.net/10400.22/4506

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Authors

Ferreira, Fernanda A.

Ferreira, Flávio

Abstract(s)

We analyse the relationship between the privatization of a public firm and government preferences for tax revenue in a Stackelberg duopoly with the public firm as the leader. We assume that the government payoff is given by a weighted sum of tax revenue and the sum of consumer and producer surplus. We get that if the government puts a sufficiently larger weight on tax revenue than on the sum of both surpluses, it will not privatize the public firm. In contrast, if the government puts a moderately larger weight on tax revenue than on the sum of both surpluses, it will privatize the public firm.