Public vs. Private Investments In Network Industries

Jean-Marc Zogheib () and Marc Bourreau
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Jean-Marc Zogheib: EconomiX - EconomiX - UPN - Université Paris Nanterre - CNRS - Centre National de la Recherche Scientifique

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Abstract: We study the competition between a private firm and public firms on prices and investment in new infrastructures. While the private firm maximizes its profits, public firms maximize the sum of their profits and consumer surplus, subject to a budget constraint. We consider two scenarios of public intervention, with a national public firm and with local public firms. In a monopoly benchmark, we find that the national public firm has the highest coverage and charges a uniform price allowing cross-subsidies between high-cost and low-cost areas. Moreover, the private firm covers as much as local public firms. In a mixed duopoly, a stronger competitive pressure drives firms' prices up while it drives down (up) the national public (private) firm's coverage.

Keywords: public firms; investment; network industries; mixed duopoly. (search for similar items in EconPapers)
Date: 2021
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Working Paper: Public vs. Private Investments In Network Industries (2021)
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