JACIII Vol.21 No.6 pp. 1034-1039
doi: 10.20965/jaciii.2017.p1034


Production Competition in Electricity Sector: Social Welfare vs. Managerial Incentives in a Partially Regulated Duopoly

Vitaliy Kalashnikov*1,†, Daniel Flores Curiel*1, and Vyacheslav V. Kalashnikov*2,*3,*4

*1Graduate School of Economics, Universidad Autónoma de Nuevo León (UANL)
Av. Lázaro Cárdenas 4600 Ote., Fracc. Residencial Las Torres Monterrey, Nuevo León, C.P. 64930, Mexico

*2Tecnológico de Monterrey (ITESM), Mexico

*3Central Economics and Mathematics Institute (CEMI), Moscow, Russia

*4Sumy State University (SumDU), Sumy, Ukraine

Corresponding author

December 20, 2016
May 2, 2017
October 20, 2017
mixed duopoly, profit maximization, social welfare.

We study production competition between two electricity producers, where one of them is subject to a nationalization decision and the other is a private producer that chooses managerial incentives to counter governmental actions. The government wants to maximize a modified form of social welfare and chooses partial nationalization, which still has a serious impact on the rival private producer. We find, that by offering managerial incentives the private producer recovers its lost profit and induces even less nationalization. We also find that such equilibrium might produce the same level of social welfare than one without incentives.

Cite this article as:
V. Kalashnikov, D. Curiel, and V. Kalashnikov, “Production Competition in Electricity Sector: Social Welfare vs. Managerial Incentives in a Partially Regulated Duopoly,” J. Adv. Comput. Intell. Intell. Inform., Vol.21 No.6, pp. 1034-1039, 2017.
Data files:
  1. [1] J. R. Barth, G. Caprio, and R. Levine, “Banking systems around the globe: do regulation and ownership affect performance and stability?,” Financial Supervision and Regulation: What Works and What Doesn’t?, Cambridge, National Bureau of Economic Research, 2001.
  2. [2] M. C. Jensen, K. J. Murphy, and E. G. Wruck, “Remuneration: where we’ve been, how we got to here, what are the problems, and how to fix them,” Finance Working Paper 44/2004, European Corporate Governance Institute, 2004.
  3. [3] M. Klein, “A theory of the banking firm,” J. of Money, Credit, and Banking, Vol.3, pp. 205-218, 1971.
  4. [4] C. Fershtman, “The interdependence between ownership status and market structure: the case of privatization,” Economica, Vol.57, pp. 319-328, 1990.
  5. [5] J. Vickers, “Delegation and the theory of the firm,” Economic J., Vol.95, pp. 138-147, 1985.
  6. [6] C. Fershtman and K. L. Judd, “Equilibrium incentives in oligopoly,” American Economic Review, Vol.77, pp. 927-940, 1987.
  7. [7] S. Sklivas, “The strategic choice of managerial incentives,” RAND J. of Economics, Vol.18, pp. 452-458, 1987.
  8. [8] P. Aghion, P. Bolton, and S. Fries, “Optimal design of bank bailouts: the case of transition economies,” J. of Institutional and Theoretical Economics, Vol.155, No.1, pp. 51-70, 1990.
  9. [9] F. Allen and D. Gale, “Competition and financial stability,” J. of Money, Credit, and Banking, Vol.36, No.3, pp. 453-480, 2004.
  10. [10] D. Bos and W. Peters, “Privatization, internal control, and internal regulation,” J. of Public Economics, Vol.36, pp. 231-258, 1989.
  11. [11] R. G. Hubbard and D. Palia, “Executive pay and performance evidence from the U.S. banking industry,” J. of Financial Economics, Vol.39, No.1, pp. 105-130, 1995.
  12. [12] T. Kato and C. Long, “Executive compensation, firm performance, and corporate governance in China: evidence from firms listed on the Shanghai and Shenzhen stock exchanges,” Economic Development and Cultural Change, Vol.54, No.3, pp. 945-983, 2006.
  13. [13] A. Kumar and B. Saha, “Spatial competition in a mixed duopoly with one partially privatized firm,” J. of Comparative Economics, Vol.36, pp. 326-341.
  14. [14] T. Matsumura, “Partial privatization in mixed duopoly,” J. of Public Economics, Vol.70, pp. 473-483, 2008.
  15. [15] N. Singh and X. Vives, “Price and quantity competition in a differentiated duopoly,” RAND J. of Economics, Vol.15, No.4, pp. 546-554, 1984.

*This site is desgined based on HTML5 and CSS3 for modern browsers, e.g. Chrome, Firefox, Safari, Edge, Opera.

Last updated on Apr. 05, 2024