AUTHORS: Fernanda A. Ferreira, Flávio Ferreira

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ABSTRACT: This paper presents an analysis of the relationship between the privatization of a state-controlled firm and government preferences for tax revenue, by using a mixed Cournot model with domestic and foreign firms. We assume that the government fixes a tax rate on the domestic production and a tariff for imported goods. The state-controlled firm aims to maximize the sum of consumer and producer surplus; the government’s objective function is a weighted sum between social welfare and tax revenue.

KEYWORDS: Privatization, import tariff, government preference, Cournot triopoly

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