TIME-BASED COMPETITION AND THE PRIVATIZATION OF SERVICES

We develop a vertical differentiation model which exhibits congestion externalities and in which firms choose service time. This model is fo rmulated for a variety of industry and ownership structures. We find a n ownership effect in which service speeds decrease when public servic es are privatized. This effect, however, could be offset and even reve rsed by increased efficiency of private services. We also investigate how prices and commitment ability with respect to service times will a ffect the service speeds in equilibrium.