State-Owned Enterprises, Competition, and Disclosure
53 Pages Posted: 13 May 2015 Last revised: 4 Aug 2016
Date Written: Aug 06, 2016
We develop a mixed-duopoly model in which a private firm competes against a state owned enterprise (SOE) who cares about social welfare and is privately informed of market demand. When the SOE's social concerns are sufficiently important and when the market competitiveness is sufficiently low, the SOE commits to fully disclose its private information. Otherwise, the SOE commits to withhold its private information. When the disclosure equilibrium prevails, the private firm can be more profitable competing against an SOE than another private firm. In this mixed-duopoly setting, the equilibrium social welfare is maximized when the SOE puts a positive weight on both social welfare and its own profit. Our analysis has further implications for both mandatory disclosure and market entry.
Keywords: state-owned enterprises, mixed markets, competition, disclosure
JEL Classification: M41, M21, H44
Suggested Citation: Suggested Citation