Mixed Oligopoly and Environmental Policy

The literature on mixed oligopoly does not consider the role that the environmental policy of the government plays on the decision whether to privatize public firms. Assuming that there are one public firm and n private firms and that the government chooses an environmental standard we show that, when the number of private firms is low enough, the public firm is privatized if it is inefficient enough. When the number of private firms is high enough, the government always privatizes the public firm. We also show that the range of values of the parameters for which the government privatizes the public firm is greater than when environmental policy is not considered.Financial support from UPV (HB-8238/2000) and DGES (BEC 2000-0301) is gratefully acknowledged