Flexible Privatization Policy in Free-Entry Markets

Sato, Susumu and Matsumura, Toshihiro (2018): Flexible Privatization Policy in Free-Entry Markets.

Abstract

We investigate a mixed oligopoly in a free-entry market in the presence of shadow cost of public funding. The government chooses the degree of privatization before the entry of private firms and then adjusts the degree of privatization after the entry. We show that a pre-entry privatization policy may serve as a commitment device if the foreign ownership share of private firms is moderate, and substitutes the ideal privatization policy with complete commitment if the equilibrium pre-entry privatization policy is partial privatization.

• Item Type: MPRA Paper
• Language: English
• Keywords: Shadow cost of public funds; free entry; state-owned public enterprises; foreign competition; time inconsistency
• 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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