Behavior-based price discrimination in the domestic and international mixed duopoly

Abstract

This study investigates mixed markets in which a social welfare-maximizing public firm and a private firm engage in behavior-based price discrimination (BBPD). A total of two cases are considered: one where domestic shareholders completely own the private firm and one where foreign shareholders completely own it. In the domestic mixed duopoly, BBPD is irrelevant from the viewpoint of domestic social welfare. This is because poaching does not occur. In the international mixed duopoly, BBPD improves domestic social welfare, as BBPD reduces the outflow of the private firm's profit to foreign shareholders. In both cases, privatization is more undesirable under BBPD than uniform pricing.