Should One Sell Domestic Firms to Foreign Ones? A Tale of Delegation, Acquisition and Collusion

Davide Dragone

Working Papers from Dipartimento Scienze Economiche, Universita' di Bologna

Abstract: In a model of repeated Cournot competition under complete information, I show how the existence of a fringe of managerial ?rms affects the stability of a cartel of strict pro?t-maximizing ?rms. There always exists a critical dimension of the fringe that makes the cartel unstable, and this dimension is non-monotone in the total number of ?rms. By appropriately selecting the dimension of the fringe, a policy maker can a ect the equilibrium outcome. As an example, I consider the case of a domestic authority that is contemplating whether to allow entry of a fringe of managerial foreign ?rms in the domestic market to increase the competitive pressure, thereby enhancing domestic welfare.

Date: 2008-01
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Journal Article: Should One Sell Domestic Firms to Foreign Ones? A Tale of Delegation, Acquisition and Collusion (2007)
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Persistent link: https://EconPapers.repec.org/RePEc:bol:bodewp:623

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