Mixed Duopoly, Environmental Externalities, and Endogenous Timing Game

Effects of partial passive ownership on the desirable production timing of the public utility in a mixed upstream market

“…While these works pointed out that the marginal production cost of inputs is closely related to the optimal degree of privatization, Chang and Ryu (2015), Wu et al (2016), and Ryu (2023) found that the public utility's market share is critical to the optimal privatization policy under foreign competition. Lee et al (2020) and Liang et al (2023) further examined the production timing in a mixed downstream market and a mixed upstream market, respectively, and showed that firms' order of moves depends on the input pricing schedule of foreign upstream suppliers and the efficiency gap between the public utility and private firms in the upstream market. Finally, Zhang and Lee (2023) considered the entry decision of foreign firms under upstream privatization and downstream subsidization policies and found that the efficiency gap between the public utility and private firms is crucial.…”

“…Our analysis of endogenous production timing games in a vertical structure market is also related to previous works in mixed markets. For instance, Lee et al (2020) examined a mixed downstream market showing that firms' order of moves depends on the input pricing schedule of upstream suppliers, while Liang et al (2023) examined a mixed upstream market showing that the efficiency gap between the public utility and private firms is detrimental. In this paper, we further show that endogenous production timing critically depends on the private share of the PUO and the level of PPO.…”