Flexible technology Privatization Public firm Mixed duopoly
We study firms' adoption of flexible versus dedicated technologies in the context of a mixed versus a private duopoly with product differentiation. The flexible technology allows a firm to become multiproduct or multimarket without bearing additional costs. We find that a configuration where both firms adopt flexible technologies is more likely to arise in equilibrium in the private duopoly. A similar result occurs when both firms use a dedicated technology in the case of either almost independent products or products that are close substitutes. Privatization of the public firm is socially beneficial only in limited circumstances.
This is part of an Economics Discussion Paper Series. It is also available at: http://ideas.repec.org/p/lbo/lbowps/2006_1.html.