Mixed duopoly, privatization, and subsidization with excess burden of taxation Toshihiro Matsumura Institute of Social Science, The University of Tokyo Yoshihiro Tomaru School of Economics, Chukyo University Abstract. We investigate optimal tax-subsidy policies in mixed and private oligopolies with excess burden of taxation. We compare the optimal subsidies and the resulting welfare levels among four regimes: mixed and private Cournot duopolies and Stackelberg competition with public and private leaderships. We show that, in contrast to the existing works on the privatization neutrality theorem, privatization affects resulting welfare. JEL classification: L13, L33, H20 Duopole mixte, privatisation et subsidisation en pr´ esence de fardeau fiscal exc´ edentaire. On examine les politiques optimales de taxes et de subventions dans le cas d’oligopoles mixtes et priv´ es en pr´ esence de fardeau fiscal exc´ edentaire. On compare les subsides optimaux et les effets sur le niveau de bien-ˆ etre dans quatre r´ egimes : les duopoles de Cournot (mixte et priv´ e) et la concurrence ` a la Stackelberg avec leadership public et priv´ e. On montre que contrairement ` a ce que sugg´ eraient les travaux ant´ erieurs sur le th´ eor` eme de la neutralit´ e de la privatisation, la privatisation affecte les niveaux de bien-ˆ etre. 1. Introduction Despite the wave of privatization prevalent across the globe, public firms still exist and compete against private firms in a wide range of industries. Such markets, called mixed oligopolies or mixed markets, are still important in many developed, developing, and former communist transitional countries. Most mixed markets are directly connected to the livelihoods of the people, such as railways, natural We are grateful to the participants at the seminars at the University of Tokyo for their helpful comments and suggestions. We are also indebted to two anonymous referees and the co-editor, Joanne Roberts, for their precious and constructive comments and suggestions. Needless to say, we are responsible for any remaining errors. We gratefully acknowledge the financial supports of Grant-in-Aid from the Japanese Ministry of Education, Science and Culture. The second author also acknowledges financial support from the Seimeikai Foundation. Email: yoshihiro.tomaru@ gmail.com Canadian Journal of Economics / Revue canadienne d’Economique, Vol. 46, No. 2 May / mai 2013. Printed in Canada / Imprim´ e au Canada 0008-4085 / 13 / 526–554 / C  Canadian Economics Association