Research

I study a product differentiation model where a politically tied public firm competes with a private one in qualities and prices. I show that the public firm may mimic the median voter’s preferences to maximize consensus. Then, I study the effects of partial privatization. Depending on the degree of privatization, (i) the private firm may enter the market or not; (ii) the public firm’s profits may exceed those of its competitor. I also show that the socially optimal degree of privatization is interior.

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