Privatization, Pollution, and Welfare in a Mixed Differentiated Duopoly

  • Jiancai Pi Nanjing University, Department of Economics, China
  • Yiwen Guan Nanjing University, Department of Economics, China

Abstract

This paper investigates the impacts exerted by the residents’ environmental preference on privatization in a mixed differentiated duopoly. We assume that the production will generate environmental pollution, which causes an extra cost that the private firm does not bear but residents with the environmental preference have to tolerate. The government pursues to maximize social welfare. We find that the residents’ environmental preference has significant impacts on privatization. When residents pay more attention to environmental pollution, privatization cannot induce more social welfare, and thus the government will choose not to privatize the public firm. The degree of substitution of products will affect the results when the value of the residents’ environmental preference is given, but the order of the firms’ moves will not change the results.


Key words: Environmental preference, Privatization, Differentiated duopoly, Social welfare. 
JEL: H21, L33, Q58.


Privatizacija, zagađenje i blagostanje u mešovitom diferenciranom duopolu


U ovom radu se istražuju uticaji ekoloških preferencija stanovnika na privatizaciju u mešovitom diferenciranom duopolu. Pretpostavljamo da će proizvodnja prouzrokovati zagađenje životne sredine, što uzrokuje dodatni trošak koji privatno preduzeće ne plaća, ali stanovnici sa ekološkim prioritetima moraju da tolerišu. Vlada nastoji maksimizirati socijalno blagostanje. Smatramo da ekološke preferencije stanovnika imaju značajan uticaj na privatizaciju. Kada stanovnici više pažnje posvećuju zagađenju životne sredine, privatizacija ne može povećati društveno blagostanje, pa će vlada odlučiti da ne privatizuje javno preduzeće. Stepen zamenljivosti proizvoda će uticati na rezultate kad je vrednost ekološke preferencije stanovnika data, ali redosled povlačenja poteza preduzeća neće promeniti rezultate.


Ključne reči: Ekološka preferencija, privatizacija, diferencirani duopol, socijalno blagostanje.

How to Cite
Pi J., & Guan Y. (2018). Privatization, Pollution, and Welfare in a Mixed Differentiated Duopoly. Panoeconomicus, 65(4). doi:10.2298/PAN130909001P
Section
Original scientific paper