Price-setting mixed duopoly, partial privatization and subsidization: substitute and complementary goods

This paper examines partial privatization in a price-setting mixed duopoly model to reassess the welfare effect of production subsidies. The paper considers both substitute and complementary goods. The paper demonstrates that the result of price competition with complementary goods is essentially the same as that of price competition with substitute goods. The paper also demonstrates that the optimal subsidy, output and economic welfare are higher in price competition with complementary goods than in price competition with substitute goods.