The proportion of state-owned shares and capacity sharing with constraints and prices in a mixed oligopoly

Abstract

This study constructs an oligopoly model composed of mixed-ownership and private enterprises, examining the equilibrium results of three cases: when two enterprises compete with sufficient capacity (Model AA), insufficient capacity and overcapacity coexist without sharing (Model IA), and sharing (Model IS). This study also explores the effects of the proportion of state-owned shares, capacity constraints, and capacity prices. The realisation conditions and impacts of capacity sharing are further analysed. The results show that the efficiency of state-owned capital affects the effects of state-owned shares on the equilibrium results. An optimal capacity price exists for the capacity provider (private enterprise). Capacity sharing can effectively allocate resources and increase profits; however, consumers and society do not necessarily benefit from it. Full privatisation and the highest proportion of state-owned shares may be the best choice for the government under certain conditions. The government can intervene in enterprises’ capacity decision-making through subsidies to promote social welfare and realise capacity sharing simultaneously. Moreover, the government subsidises different enterprises when the proportions of state-owned shares and capacity prices are within different ranges.