Minoru Kunizaki

Competition and Quality in a Mixed Duopolistic Long-Term Care Market

We investigate a duopolistic long-term care market with uncertainty using a Hotelling-type spatial competition model where care providers decide the quality of the care to attract patients. We deal with three types of competition structures: (i) a duopoly with private nonprofit (NP) providers, (ii) a mixed duopoly with an NP and a private for-profit (FP) provider, and (iii) a duopoly with FP providers. We show that the equilibrium levels of quality in the mixed duopolistic market are higher than those in the NP duopoly and lower than those in the FP duopoly. Furthermore, in the mixed duopolistic market, while information improvement for the revision of the reimbursement system increases the quality levels of both providers, the effect of the information improvement in helping patients choose their care provider on the quality depends on the variance of the perceived quality.

Market Expansion by Advertising and a Mixed Oligopoly

We introduce a market-expanding measure, advertising, into the model of a mixed oligopoly and show how advertising affects the levels of production for both public and private firms. We also investigate the advertising level of these firms under a mixed oligopoly and after the privatization of the public firm. Through this analysis, we clarify the critical role of the public firm in expanding market demand. The public firm increases its level of advertising because it acknowledges the expanding effect on the behavior of private firms.

International Mixed Oligopoly

This chapter outlines the basic properties of an international mixed oligopoly and considers the policy implications of privatization in the context of a strategic trade policy. We show here that the government sets a low level of privatization to reduce the profit of foreign firms in a non-corporative equilibrium. In a free-entry equilibrium, the number of private firms affects the degree of privatization in an international mixed oligopoly model. We present the complimentary relationship between import tariffs and the degree of privatization. Furthermore, we consider a corporative privatization policy. Regarding a non-corporative equilibrium, a higher degree of privatization in both countries improves global welfare.

Optimal Partial Privatization in an International Mixed Oligopoly Under Various Tax Principles

This chapter considers optimal privatization policy in an international mixed oligopoly. Allowing for partial privatization and cost asymmetry, we analyze the optimal policies under various tax regimes: arbitrary taxation, origin principle, destination principle, import tariffs, and a combination of tax and import tariffs. Our main results are as follows. First, when the government can arbitrarily levy taxes on a public firm’s output, maximum welfare is independent of the degree of privatization as long as the public firm is at least partially privatized. Second, under tax schemes that restrict freedom of taxation, an optimal privatization policy depends on tax regimes and cost asymmetry. Third, the elimination of import tariffs and the privatization of public firms improve both domestic welfare and a foreign competitor’s profit if a production subsidy is introduced in exchange for tariff elimination. Our results suggest that fiscal incentives such as tax and subsidies are superior in maximizing welfare when compared with managerial incentives such as public ownership.

Political Economic Analysis of Privatization

This chapter analyzes the effect of domestic lobbying on the optimal degree of privatization and social surplus in a closed mixed oligopoly model and an extended two-country model. We find that lobbying activity leads to overprivatization in a closed economy and may improve social welfare in a two-country economy. When each country’s benevolent government determines the optimal privatization level, the privatization level always leads to underprivatization. This means an open trade policy leads to underprivatization. However, our results show that overprivatization may also exist in an open economy.

Basic Properties of a Mixed Oligopoly Model

In this chapter, we discuss previous studies and summarize the properties of a mixed oligopoly. With our overview of a mixed oligopoly model, we attempt to understand the fundamental characteristics of government intervention within an oligopoly. We consider the partial privatization problem in relation to the Stackelberg leader solution. The second-best outcome can be achieved by partial privatization. We also show that full privatization is not optimal if private firms can enter the oligopolistic market. In a free-entry equilibrium, the government can control excessive entry by imposing an entry tax.