Partial Privatization under Multimarket Price Competition

Masuda, Taku and Sato, Susumu (2017): Partial Privatization under Multimarket Price Competition.

Abstract

We investigate the effect of multimarket contacts on the privatization policy in mixed duopoly with price competition. There are two markets, one of which is served solely by the state-owned public firm, and the other is served by both public and private firms. Two markets are linked by the production technology of the public firm. In the general model, we first show that privatization is never optimal in the absence of multimarket contacts, i.e., if there is only one monopoly market or one duopoly market. Then, using a linear-quadratic specification, we show that a positive degree of privatization can be optimal in the presence of multimarket contacts. This result has an implication for the privatization policy in universal service sectors.

• Item Type: MPRA Paper
• Language: English
• Keywords: Multimarket contacts, partial privatization, state-owned public enterprise
• Subjects: H - Public Economics > H4 - Publicly Provided Goods > H42 - Publicly Provided Private Goods; L - Industrial Organization > L3 - Nonprofit Organizations and Public Enterprise > L33 - Comparison of Public and Private Enterprises and Nonprofit Institutions ; Privatization ; Contracting Out

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