In this study, we aim to investigate the impact of privatization on the degree of cooperation and competition in a mixed oligopoly market. We consider a duopoly market that comprises one semipublic firm and one private firm. Each firm is assumed to determine the level of two types of effort: the cooperative effort made to enlarge the total market size and the competitive effort made to increase market share.
In a contest framework, our results show that the competitive effort level of the semipublic firm is smaller than that of the private firm. The more the semipublic firm is concerned for social welfare, the less it competes. On the basis of average costs, we then analyze the case in which only the semipublic firm undertakes cooperative effort. In this case, the private firm behaves as a free rider. Furthermore, we find that the semipublic firm expends more cooperative effort than does the private firm.